<PAGE>

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               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                 FORM 10-KSB

/x/  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

/ /  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1945 FOR THE TRANSITION PERIOD FROM __________ TO __________

                        COMMISSION FILE NUMBER 0-28894

                         ACCESS ANYTIME BANCORP, INC.
                (Name of small business issuer in its charter)

                  DELAWARE                              85-0444597
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
      incorporation or organization)

               801 PILE STREET, CLOVIS, NEW MEXICO       88101
            (Address of principal executive offices)   (Zip Code)

       Issuer's telephone number, including area code:  (505) 762-4417

       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:  NONE

       SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                          COMMON STOCK $.01 PAR VALUE
                          ---------------------------
                               (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                             Yes /x/        No / /

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.      /x/

     The issuer's revenues for the year ended December 31, 1997, were
$8,116,611.

     The aggregate market value of the voting stock held by non-affiliates of
the issuer, computed by reference to the average of the closing bid and asked
prices of such stock on the Nasdaq Small-Cap Market as of March 4, 1998 was
approximately $13,238,529.  (The exclusion from such amount of the market value
of the shares owned by any person shall not be deemed an admission by the issuer
that such person is an affiliate of the issuer.)

     As of March 4, 1998, the issuer had outstanding 1,217,336 shares of Common
Stock, par value $0.01 per share, its only class of Common Stock.

                        DOCUMENTS INCORPORATED BY REFERENCE

     The following document is incorporated by reference into Part III of this
Annual Report on Form 10-KSB: Definitive Proxy Statement for the issuer's 1998
Annual Meeting of Stockholders.

     Transitional Small Business Disclosure Format (check one):  Yes / /  No /x/

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<PAGE>

                               TABLE OF CONTENTS

                                                                         PAGE
                                                                         ----
                                    PART I

Item 1.   Description of Business. . . . . . . . . . . . . . . . . . .     4
          Overview . . . . . . . . . . . . . . . . . . . . . . . . . .     4
          Lending Activities . . . . . . . . . . . . . . . . . . . . .     4
               General . . . . . . . . . . . . . . . . . . . . . . . .     4
               Loan Portfolio Composition. . . . . . . . . . . . . . .     6
               One-to-Four Family Residential Mortgage Lending . . . .     8
               Multi-Family and Commercial Real Estate Lending . . . .     9
               Commercial Business Lending . . . . . . . . . . . . . .    10
               Construction Lending. . . . . . . . . . . . . . . . . .    10
               Consumer Lending. . . . . . . . . . . . . . . . . . . .    10
               Loan Servicing. . . . . . . . . . . . . . . . . . . . .    11
          Originations, Purchases and Sales of Loans . . . . . . . . .    11
          Asset Quality. . . . . . . . . . . . . . . . . . . . . . . .    12
               Delinquent Loans. . . . . . . . . . . . . . . . . . . .    12
               Non-Performing Assets . . . . . . . . . . . . . . . . .    13
               Criticized Assets . . . . . . . . . . . . . . . . . . .    14
               Allowance for Loan Losses . . . . . . . . . . . . . . .    14
          Investment Activities. . . . . . . . . . . . . . . . . . . .    16
               General . . . . . . . . . . . . . . . . . . . . . . . .    16
               Other Investments . . . . . . . . . . . . . . . . . . .    18
          Sources of Funds . . . . . . . . . . . . . . . . . . . . . .    18
               The Company . . . . . . . . . . . . . . . . . . . . . .    18
               The Bank. . . . . . . . . . . . . . . . . . . . . . . .    18
               Borrowings. . . . . . . . . . . . . . . . . . . . . . .    22
          Subsidiary of the Bank . . . . . . . . . . . . . . . . . . .    22
          Regulation . . . . . . . . . . . . . . . . . . . . . . . . .    22
               General . . . . . . . . . . . . . . . . . . . . . . . .    22
               Regulation of the Company . . . . . . . . . . . . . . .    23
               Federal Securities Law. . . . . . . . . . . . . . . . .    24
               Insurance of Accounts and Regulations by the FDIC . . .    24
               Regulatory Capital Requirements . . . . . . . . . . . .    25
               Limitations on Dividends and Other Capital
                 Distributions . . . . . . . . . . . . . . . . . . . .    26
               Liquidity . . . . . . . . . . . . . . . . . . . . . . .    27
               Accounting. . . . . . . . . . . . . . . . . . . . . . .    27
               Qualified Thrift Lender Test. . . . . . . . . . . . . .    28
               Community Reinvestment Act. . . . . . . . . . . . . . .    28
               Transactions with Affiliates. . . . . . . . . . . . . .    28
               Federal Home Loan Bank System . . . . . . . . . . . . .    29
               Regulatory Environment for 1998 . . . . . . . . . . . .    29
          Federal and State Taxation . . . . . . . . . . . . . . . . .    30
               Federal Taxation. . . . . . . . . . . . . . . . . . . .    30
               State Taxation. . . . . . . . . . . . . . . . . . . . .    31
          New Accounting Standards . . . . . . . . . . . . . . . . . .    32
          Competition. . . . . . . . . . . . . . . . . . . . . . . . .    33
          Employees. . . . . . . . . . . . . . . . . . . . . . . . . .    33

                                 (Continued)

                                      2
<PAGE>
                              TABLE OF CONTENTS
                                 (CONTINUED)
                                                                         PAGE
                                                                         ----

Item 2.   Description of Property. . . . . . . . . . . . . . . . . . .    34

Item 3.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .    34

Item 4.   Submission of Matters to a Vote of Security Holders. . . . .    34


                                      PART II

Item 5.   Market for Registrant's Common Equity and Related
            Stockholder Matters. . . . . . . . . . . . . . . . . . . .    35

Item 6.   Management's Discussion and Analysis or Plan of Operation. .    36
               Selected Consolidated Financial Highlights. . . . . . .    36
               General . . . . . . . . . . . . . . . . . . . . . . . .    38
               Regulatory Matters. . . . . . . . . . . . . . . . . . .    39
               Results of Operations . . . . . . . . . . . . . . . . .    40
                 Comparison of Years Ended December 31, 1997
                   and 1996. . . . . . . . . . . . . . . . . . . . . .    42
                 Comparison of Years Ended December 31, 1996
                   and 1995. . . . . . . . . . . . . . . . . . . . . .    42
               Asset/Liability Management and Interest Rate
                Sensitivity. . . . . . . . . . . . . . . . . . . . . .    43
               Liquidity and Capital Resources . . . . . . . . . . . .    46
               Asset Quality . . . . . . . . . . . . . . . . . . . . .    47
                 Allowance for Loan Losses . . . . . . . . . . . . . .    47
                 Non-Performing Assets . . . . . . . . . . . . . . . .    49
                 Investment Securities . . . . . . . . . . . . . . . .    49
               Off-Balance Sheet Financial Instruments . . . . . . . .    49
               Income Taxes. . . . . . . . . . . . . . . . . . . . . .    50
               Impact of Inflation and Changing Prices . . . . . . . .    50
               Impact of New Accounting Standards. . . . . . . . . . .    50
               Impact of Year 2000 . . . . . . . . . . . . . . . . . .    52
               Forward-Looking Information . . . . . . . . . . . . . .    52

Item 7.   Financial Statements . . . . . . . . . . . . . . . . . . . .    53

Item 8.   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosures . . . . . . . . . . .    53


                                      PART III

Item 9.   Directors, Executive Officers, Promoters and Control
            Persons; Compliance with Section 16(a) of the
            Exchange Act . . . . . . . . . . . . . . . . . . . . . . .    53

Item 10.  Executive Compensation . . . . . . . . . . . . . . . . . . .    53

Item 11.  Security Ownership of Certain Beneficial Owners
            and Management . . . . . . . . . . . . . . . . . . . . . .    53

Item 12.  Certain Relationships and Related Transactions . . . . . . .    53

Item 13.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .    54

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    56

Index to Consolidated Financial Statements . . . . . . . . . . . . . .   F-1

Glossary of Certain Terms. . . . . . . . . . . . . . . . . . . . . . .   G-1

                                       3

<PAGE>

                                       PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

PLEASE REFER TO THE GLOSSARY OF CERTAIN TERMS (PAGE G-1) FOR DEFINITIONS OF
VARIOUS TERMS.

OVERVIEW

     Access Anytime Bancorp, Inc. (the "Company") is a Delaware corporation
which was organized in 1996 for the purpose of becoming the thrift holding
company of First Savings Bank, F.S.B. renamed FirstBank (the "Bank").  The
Company owns all of the outstanding stock of the Bank, which is the Company's
principal asset. The Bank was originally chartered by the FHLBB in 1934.
Currently, deposits with the Bank are insured to maximum extent permitted by
the SAIF, which is under the supervision of the FDIC.  The Bank is a member
of the FHLB system and the Company and the Bank are subject to comprehensive
regulation, examination, and supervision of the OTS and the FDIC.

     The Bank is the third largest financial institution headquartered in
Clovis, New Mexico, with approximately $107 million in assets.  The Bank
conducts full service banking operations through three offices located in
Clovis and Portales, New Mexico and through a loan production office in Rio
Rancho, New Mexico, near Albuquerque.  The Company's executive offices are
located at 801 Pile Street, Clovis, New Mexico.  The telephone number at that
address is (505) 762-4417.  In general, the Bank has a normal lending
territory, as defined by federal regulations, that includes all areas within
the State of New Mexico, and a 100 mile radius from the Company's main office
in Clovis, New Mexico, which extends into the State of Texas.  The primary
service area's economic base is derived from Cannon Air Force Base, a
regional switching headquarters for the Burlington Northern Santa Fe
Railroad, Eastern New Mexico University, and farming and ranching.

     The Company's and the Bank's revenues are derived principally from
interest on loans and securities, servicing fee income, income from deposit
account service charges and gains on the sale of loans.  The results of
operations of the Company and the Bank, in general, are significantly
influenced by general economic conditions, the monetary and fiscal policies
of the federal government, competition in the Company's and the Bank's market
area, and the policies of financial institution regulatory authorities.

     The Bank, since 1991, has been primarily engaged in the business of
attracting deposits from the general public, making loans secured by first
liens on single-family homes (primarily for sale into the secondary market)
and investing in mortgage related securities.  The principal sources of funds
for the Bank's lending and investing activities include the sale of loans,
principal payments and prepayments on loans and mortgage related securities,
and deposits. The Bank's primary sources of income are income on loans and
securities, loan servicing fees, income from deposit account service charges,
and gains on the sale of loans.  Its principal expenses are interest paid on
deposits and borrowings and general operating expenses.  The earnings of the
Bank depend primarily on the differences between its income from lending and
investment activities and the interest cost of its deposits and borrowings.

LENDING ACTIVITIES

     GENERAL.  The Bank has historically originated fixed-rate and
adjustable-rate mortgage loans.  In order to reduce its exposure to changes
in interest rates, it has also, since the early 1980's, emphasized the
origination and retention of ARM loans.  Management's strategy has been to
increase assets in its portfolio which more frequently reprice or which have
shorter maturities. In response to customer demand, however, the Bank
continues to originate conventional fixed-rate mortgages.  Since interest
rates on fixed-rate mortgage loans are low on a historical basis, it has
become difficult to originate ARM loans.

     The Bank's primary focus in lending activities is on the origination of
loans secured by first mortgages on owner-occupied, one-to-four family
residences.  The Bank also originates residential construction, commercial
real estate and consumer loans in its market area.  Most residential mortgage
loans originated by the

                                      4
<PAGE>

Bank are in conformity with FHLMC, FNMA and GNMA loan underwriting standards
so that they may be sold in the secondary market. Mortgage loans made by the
Bank are generally long-term loans, amortized on a monthly basis, with
principal and interest due each month.  The initial contractual loan payment
period for residential loans typically ranges from 15 to 30 years.  The
Bank's experience indicates, however, that real estate loans remain
outstanding for significantly shorter periods than their contractual terms.
Borrowers may refinance or prepay loans at their option, subject to any
prepayment penalty provisions, if included in the note.  Most mortgage loans
are underwritten and approved by the Bank's loan committee.

     All of the Bank's lending is subject to written underwriting standards
and to loan origination procedures.  Decisions on loan applications are made
on the basis of detailed applications and property valuations (consistent
with the Bank's written appraisal policy) by independent appraisers.  The
loan applications are designed primarily to determine the borrower's ability
to repay and the more significant items on the application are verified
through use of credit reports, financial statements, tax returns and/or
confirmations.

     In connection with the loan approval process, the Bank's loan personnel
analyze the loan application and the property involved.  All real estate
loans are processed and presented by the officers to the loan committee.
Consumer loans are approved by loan committee and/or individual loan
officers, in accordance with policies established by the Bank's Board of
Directors.

     Loan applicants are notified of the Bank's decision setting forth the
terms and conditions of the decision.  If approved, these terms and
conditions include the amount of the loan, interest rate, amortization term,
a brief description of the real estate to be mortgaged to the Bank, and the
requirement of fire and casualty insurance coverage to be maintained to
protect the Bank's interest.

     It is the policy of the Bank to obtain a title insurance policy insuring
that it has a valid lien on all property securing real estate loans.  Hazard
insurance or homeowner's policies must be obtained by the borrower prior to
closing.  If required by federal rules and regulations, flood insurance
policies are required. Upon closing, most borrowers are required to advance
funds for the establishment of a mortgage escrow account. Thereafter, the
borrower makes contributions to this account along with monthly principal and
interest payments. Disbursements are made from this account for items such as
real estate taxes, hazard insurance premiums, and private mortgage insurance
premiums.

     The Bank receives loan origination fees for originating loans and also
receives commitment fees for making commitments to originate construction,
residential, commercial, and multi-family residential loans, as well as
various fees and charges related to existing loans, which include late
charges and assumption fees.

     As part of the loan application, the borrower pays the Bank for its
out-of-pocket costs in reviewing the application, such as the appraisal fee,
whether or not the borrower closes the loan.  The interest rate charged is
normally the prevailing rate at the time the loan application is approved.
In the case of larger construction loans, the Bank normally charges a 1%
commitment fee, which may be included in the loan origination charge when the
loan is made. Commitment fees and other terms of commercial and multi-family
residential loans are individually negotiated.

     The Bank also maintains an escrow account for most of its loans secured
by real estate (as well as for loans serviced for others), in order to ensure
that the borrower provides funds to cover property taxes in advance of the
required payment.  These accounts are analyzed annually to confirm that
adequate funds are available.  For loans which do not include an escrow
requirement, an annual review of tax payments is performed by the Bank in
order to confirm payment.  In order to monitor the adequacy of cash flows on
income-producing properties, the borrower or lead lender is notified
periodically and asked to provide financial information including rental
rates and income, maintenance costs and an update of real estate property tax
payments.

     The aggregate amount of loans that the Bank is permitted to make under
applicable federal regulations to any one borrower, including related
entities, is limited generally to the greater of 15% of unimpaired capital
and surplus or $500,000.  At December 31, 1997, the maximum amount which the
Bank could have lent to any one

                                      5
<PAGE>

borrower and the borrower's related entities was approximately $1,403,000.
The Bank had one loan in excess of $1,403,000 with a remaining principal
balance of $1,532,601 at December 31, 1997, which was made prior to the
implementation of the current loan to one borrower limitations.  The note was
modified during December 1997 which encompassed an additional principal
payment by the borrower that left a remaining principal balance of $1,396,826
after the modification.

     LOAN PORTFOLIO COMPOSITION.  The following table shows the composition
of the Bank's loan portfolio in dollar amounts and in percentages as of dates
indicated.

<TABLE>

                                                                      December 31
                                       ------------------------------------------------------------------------
                                                1997                      1996                      1995
                                       --------------------       -------------------       -------------------
                                        Amount      Percent        Amount     Percent        Amount     Percent
                                       --------     -------       --------    -------       --------    -------
                                                                     (In Thousands)
<S>                                    <C>          <C>           <C>         <C>           <C>        <C>
Real estate loans (a):
   Residential mortgage loans:
      One-to-four family               $ 37,875      63.45%       $ 26,921      56.76%      $ 22,991     63.94%
      Multi-family                          942       1.58             961       2.03            995      2.76
      Other dwelling units                  762       1.28           1,060       2.23          1,114      3.10
   Commercial                             8,741      14.64           9,260      19.52          5,683     15.81
                                       --------     ------        --------     ------       --------    ------

         Total real estate loans         48,320      80.95          38,202      80.54         30,783     85.61
                                       --------     ------        --------     ------       --------    ------

Other loans:
   Savings accounts                         627       1.05             867       1.83            897      2.50
   Other consumer items (b)              10,750      18.00           8,360      17.63          4,276     11.89
                                       --------     ------        --------     ------       --------    ------

         Total other loans               11,377      19.05           9,227      19.46          5,173     14.39

         Total loans                     59,697     100.00%         47,429     100.00%        35,956    100.00%
                                                    ------                     ------                   ------
                                                    ------                     ------                   ------
Less:
   Loans in process                         535                      1,077                       863
   Discounts, deferred loan fees
    and other                               463                        327                       333
   Allowance for loan losses                527                        429                       428
                                       --------                   --------                  --------
         Total loans receivable,
          net                          $ 58,172                   $ 45,596                  $ 34,332
                                       --------                   --------                  --------
                                       --------                   --------                  --------
</TABLE>

(a)  Includes construction loans to be converted to permanent loans and
     refinanced loans.
(b)  Includes, among other things, automobile, credit card and home improvement
     loans.


                                       6

<PAGE>

     The following table shows the composition of the Bank's loan portfolio
by fixed- and adjustable-rate categories at the dates indicated.

<TABLE>
                                                                      December 31
                                       ------------------------------------------------------------------------
                                                1997                      1996                      1995
                                       --------------------       -------------------       -------------------
                                        Amount      Percent        Amount     Percent        Amount     Percent
                                       --------     -------       --------    -------       --------    -------
                                                                     (In Thousands)
<S>                                    <C>          <C>           <C>         <C>          <C>          <C>
Fixed-rate loans:
Real estate (a):
   Residential mortgage loans:
      One-to-four family               $ 27,835      46.63%       $ 15,345     32.35%      $ 10,554      29.35%
      Multi-family                          626       1.05             573      1.21            562       1.57
      Other dwelling units                  317        .53             321      0.68            324       0.90
   Commercial                             5,669       9.50           4,518      9.52          1,176       3.27
                                       --------     ------        --------    ------       --------     ------

         Total real estate loans         34,447      57.71          20,757     43.76         12,616      35.09
                                       --------     ------        --------    ------       --------     ------
Other:
   Savings accounts                         627       1.05             867      1.83            897       2.50
   Consumer (b)                          10,681      17.89           8,038     16.95          1,859       5.16
                                       --------     ------        --------    ------       --------     ------

         Total other loans               11,308      18.94           8,905     18.78          2,756       7.66
                                       --------     ------        --------    ------       --------     ------

         Total fixed-rate loans          45,755      76.65          29,662     62.54         15,372      42.75
                                       --------     ------        --------    ------       --------     ------

Adjustable-rate loans:
Real estate (a):
   Residential mortgage loans:
      One-to-four family                 10,040      16.82          11,576     24.40         12,437      34.59
      Multi-family                          316       0.53             388      0.82            433       1.21
      Other dwelling units                  445       0.75             739      1.56            790       2.20
   Commercial                             3,072       5.14           4,742     10.00          4,507      12.53
                                       --------     ------        --------    ------       --------     ------

         Total real estate loans         13,873      23.24          17,445     36.78         18,167      50.53

Consumer (b)                                 69       0.11             322      0.68          2,417       6.72
                                       --------     ------        --------    ------       --------     ------

         Total adjustable-rate loans     13,942      23.35          17,767     37.46         20,584      57.25
                                       --------     ------        --------    ------       --------     ------
         Total loans receivable          59,697     100.00%         47,429    100.00%        35,956     100.00%
                                                    ------                    ------                    ------
                                                    ------                    ------                    ------
Less:
   Loans in process                         535                      1,077                      863
   Discounts, deferred loan fees and
    other                                   463                        327                      333
   Allowance for loan losses                527                        429                      428
                                       --------                   --------                 --------

         Total loans receivable, net   $ 58,172                   $ 45,596                 $ 34,332
                                       --------                   --------                 --------
                                       --------                   --------                 --------

</TABLE>

(a)  Includes construction loans to be converted to permanent loans and
     refinanced loans.
(b)  Includes, among other things, automobile, credit card and home improvement
     loans.

                                       7
<PAGE>

     The following table outlines the specific loan types with contractual
maturity dates as of December 31, 1997.  Loans which have adjustable or
renegotiable rates are shown as maturing during the period when the contract
is due.  This schedule does not reflect the effects of possible principal
prepayments by the borrower.

<TABLE>

                                     Real Estate                            Non-Real Estate
                      -------------------------------------   -----------------------------------------
                           Mortgages        Construction            Consumer        Commercial Business         Total
                      ------------------  -----------------   -------------------   -------------------  -------------------
                                Weighted           Weighted              Weighted             Weighted              Weighted
                                 average            average               average              average               average
                       Amount     rate     Amount    rate      Amount      rate      Amount     rate      Amount      rate
                      --------    ----    --------   ----     --------     ----     --------    ----     --------     ----
                                                                (In Thousands)
<S>                   <C>         <C>     <C>       <C>       <C>         <C>       <C>         <C>      <C>         <C>
Within one year       $  2,613    8.90%    $ 889    10.01%    $   665      9.29%     $   472     9.43%   $  4,639     9.22%
More than one
  year through
  two years                128    8.49        --       --         892     11.40          304     7.06       1,324    10.12
More than two
  years through
  three years              338    7.82        --       --       1,410     11.00          523     8.30       2,271     9.90
More than three
  years through
  five years             1,578    9.44        --       --       4,629     10.91          201     8.93       6,408    10.49
More than five
  years through
  ten years              3,515    8.51        --       --       2,137     10.84           25    10.50       5,677     9.39
More than ten
  years through
  fifteen years         23,826    7.63        --       --          --        --          119     9.50      23,945     7.64
More than fifteen
  years                 15,433    8.21        --       --          --        --           --       --      15,433     8.21
                      --------    ----     -----    -----     -------     -----      -------     ----    --------     ----

Total loans
  receivable          $ 47,431    8.02%    $ 889    10.01%    $ 9,733     10.77%     $ 1,644     8.59%   $ 59,697     8.52%
                      --------    ----     -----    -----     -------     -----      -------     ----    --------     ----
                      --------    ----     -----    -----     -------     -----      -------     ----    --------     ----
</TABLE>

     As of December 31, 1997, the total amount of loans with maturities
longer than one year which had fixed interest rates was approximately $44
million and with floating or adjustable interest rates was approximately $11
million.

     ONE-TO-FOUR FAMILY RESIDENTIAL MORTGAGE LENDING.  The primary lending
activity of the Bank has been the granting of conventional loans to enable
borrowers to purchase new or existing homes.  The Bank also originates
VA-guaranteed and FHA-insured loans.  Residential loan originations are
generated by the Bank's marketing efforts, its present customers, walk-in
customers and referrals from realtors and builders.  The Bank has focused its
lending efforts primarily on the origination of loans secured by first
mortgages on owner-occupied, single-family residences in its market area.

     The Bank's fixed-rate loans generally conform to secondary market
standards (I.E., FHLMC, FNMA and GNMA standards) and, since 1991, have been
primarily originated for sale in the secondary market.  A portion of these
loans has been originated pursuant to forward sales commitments.  Most of the
Bank's fixed-rate residential loans have contractual terms to maturity of 30
years.  As a part of its asset/liability management strategy and in response
to an increase in refinancing activity, the Bank also originates 15 year
fixed-rate, fully amortizing loans.  Since 1996, the Bank began to put these
15 year fixed-rate loans in the loan portfolio, while continuing to sell the
30 year fixed-rate loans.  Interest rates charged on these fixed-rate loans
are competitively priced according to market conditions.

     The Bank has offered ARM loans at rates, terms and fees determined in
accordance with market and competitive factors.  The programs currently
offered primarily meet the standards and requirements of the secondary market
for residential loans.  The Bank's current one-to-four family residential ARM
loans are fully

                                       8
<PAGE>

amortizing loans with contractual maturities of up to 30 years.  The interest
rates on the ARM loans originated by the Bank are subject to adjustment at
stated intervals and are subject to annual and lifetime adjustment limits
below and above the initial rate.  Most of the Bank's ARM loans have interest
rates which adjust annually based on a margin over one of several indices.
These loans' annual and lifetime caps on interest rate increases may reduce
the extent to which they can help protect the Bank against interest rate
risk.  The Bank has from time to time offered ARM loans at below the
fully-indexed rate; however, borrowers of ARM loans are qualified at the
fully-indexed rates.

     The Bank retains ARM loans in its portfolio consistent with its ongoing
asset/liability objectives.  ARM loans decrease the risks associated with
changes in interest rates but involve other risks, primarily because as
interest rates rise, the payment by the borrower rises to the extent
permitted by the terms of the loan, thereby increasing the potential for
default.  At the same time, the marketability of the underlying property may
be adversely affected by higher interest rates.  The Bank believes that these
risks, which have not had a material adverse effect on the Bank to date,
generally are less than the risks associated with holding fixed-rate loans in
a rising interest rate environment. In this regard, the Bank's delinquency
experience on its ARM loans has generally been similar to its experience on
fixed-rate residential loans.

     The Bank evaluates both the borrower's ability to make principal,
interest and escrow payments and the value of the property that will secure
the loan. The Bank originates residential mortgage loans with loan-to-value
ratios up to 95%.  On any mortgage loan exceeding an 80% loan-to-value ratio
at the time of origination, the Bank will generally require private mortgage
insurance in an amount intended to reduce the Bank's exposure to 80% or less
of the appraised value of the underlying property, unless otherwise approved
by the Bank's Board of Directors.

     The Bank's residential mortgage loans customarily include a due-on-sale
clause giving the Bank the right to declare the loan immediately due and
payable in the event that, among other things, the borrower sells or
otherwise disposes of the property subject to the mortgage and the loan is
not repaid.  The Bank has generally enforced due-on-sale clauses in its
mortgage loan contracts. Yield increases may be obtained through the
authorization of assumptions of existing loans at higher rates of interest,
assuming the current rates are higher than the existing note rate, and the
imposition of assumption fees.  ARM loans may be assumed provided home buyers
meet the Bank's underwriting standards and the applicable fees are paid.

     MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING.  The Bank's
multi-family and commercial real estate loan portfolio includes loans secured
by apartment buildings, office buildings, retail stores and other properties,
most of which are located in the Bank's normal lending territory.  The Bank
intends to originate multi-family and commercial real estate loans in the
future, subject to regulatory restrictions.  Multi-family and commercial real
estate loans generally are originated in amounts up to 75% of the appraised
value of the property securing the loan.  Commercial and multi-family loans
are made at both fixed and adjustable interest rates for terms of up to 25
years.  The terms and conditions of multi-family and commercial real estate
loans are negotiated on a case-by-case basis.

     Appraisals on properties securing multi-family and commercial real
estate loans originated by the Bank are performed by an independent appraiser
subject to regulatory guidelines at the time the loan is made.  All
appraisals on multi-family and commercial real estate loans are reviewed by
the Bank's management. In addition, the current underwriting procedures
require verification of the borrower's credit history, income and financial
statements, banking relationships, references and income projections for the
property.  Personal guarantees are generally obtained for the Bank's
multi-family and commercial real estate loans.

     Multi-family and commercial real estate lending affords the Bank an
opportunity to receive interest at rates higher than those generally
available from one-to-four family residential lending.  Nevertheless, loans
secured by such properties are generally larger and involve a greater degree
of risk than one-to-four family residential mortgage loans.  Because payments
on loans secured by multi-family and commercial real estate properties are
often dependent on the successful operation or management of the properties,
repayment of such

                                       9
<PAGE>

loans may be subject to adverse conditions in the real estate market or the
economy.  If the cash flow from the project is reduced (for example, if
leases are not obtained or renewed), the borrower's ability to repay the loan
may be impaired.  In addition, adjustable-rate multi-family and commercial
real estate loans are subject to increased risk of delinquency or default as
interest rates increase.  The Bank has attempted to minimize these risks
through its underwriting standards and by lending primarily on existing
income-producing properties.

     COMMERCIAL BUSINESS LENDING.  The Bank began offering commercial
business loans guaranteed by the SBA in 1991.  The SBA program provides
lenders with the ability to offer flexible terms and longer maturities on
loans to small businesses and professionals.  The program provides the lender
a guaranteed portion (generally 75%-80%) of principal and interest.  Since
these loans are guaranteed, they generally offer minimal risk to the Bank.
These loans are made with adjustable and fixed interest rates with maturities
of up to 25 years, depending on the underlying collateral.  The loans are
approved by the SBA.  The Bank intends to expand its commercial lending by
utilizing the SBA program.

     The Bank intends to provide short and medium term credit to businesses
in the Bank's primary lending territory.  Commercial loans include revolving
credit lines and term loans, or a combination thereof, and are generally
secured by equipment, accounts receivable, inventories, real estate or other
business assets or a combination thereof.  Commercial business loans are made
pursuant to specified loan approval limits set by the Bank's Board of
Directors.  The Bank usually requires that business borrowers maintain their
operating accounts with the Bank in the form of demand deposits.  Loans made
to corporations are generally personally guaranteed by the principals of the
corporation.

     CONSTRUCTION LENDING.  The Bank originates loans to finance the
construction of single-family residences and commercial businesses.  Many of
these loans are made to individuals who will ultimately be the
owner-occupants of the residence.  Such loans are generally made, although
not required, with permanent financing on the constructed property to be
provided by the Bank. Construction loans are generally made with a six month
term on a fixed-rate, interest-only basis.  Residential construction loans to
owner-occupants are generally underwritten using the same criteria as for
one-to-four family residential loans.  Commercial construction loans are
generally made with 12 to 24 month maturities.  Loan proceeds are disbursed
in increments as construction progresses and inspections warrant.

     Construction loans afford the Bank the opportunity to charge loan
origination fees, to increase the frequency of repricing of its loan
portfolio and to earn yields higher than those obtainable on loans secured by
existing one-to-four family residential properties.  The higher yields
reflect the higher risks associated with construction lending, which include
principally the difficulty in evaluating accurately the total funds required
to complete a project and the post-completion value of the project.  As a
result, the Bank places a strong emphasis upon the borrower's ability to
repay and the experience and expertise of the builder who has contracted to
construct the property.

     CONSUMER LENDING.  Management considers consumer lending to be an
important component of its strategic plan.  Specifically, consumer loans
generally have shorter terms to maturity (thus reducing the Bank's exposure
to changes in interest rates) and carry higher rates of interest than do
one-to-four family residential mortgage loans. In addition, management
believes that the offering of consumer loan products helps to expand and
create stronger ties to its existing customer base by increasing the number
of customer relationships and providing cross-marketing opportunities.  Under
applicable federal laws, the Bank is authorized to invest up to 35% of its
assets in consumer loans excluding credit card and education loans.

     The Bank offers a variety of secured consumer loans, including home
improvement loans, auto loans, personal lines of credit, equity lines of
credit and loans secured by savings deposits.  The Bank also offers a limited
amount of unsecured and credit card loans.  The Bank currently originates all
of its consumer loans in its market area.  Consumer loan terms vary according
to the type of collateral, length of contract and creditworthiness of the
borrower. The Bank's consumer loans generally have fixed rates of interest.


                                       10
<PAGE>

     The Bank currently has fifteen arrangements to originate consumer
automobile loans on an indirect basis (I.E., where loan contracts are
purchased from automobile retailers which have extended credit to their
customers).  The Bank applies the underwriting standards mentioned below in
the approval process of purchasing these contracts.  These loans have a fixed
interest rate and maturities of 6 years or less.  As of December 31, 1997,
the Bank had $5,130,362 in indirect automobile contracts or 8.6% of its loan
portfolio before net items.

     The underwriting standards employed by the Bank for consumer loans
include a determination of the applicant's payment history on other debts and
an assessment of the ability to meet existing obligations and payments on the
proposed loan.  Although creditworthiness of the applicant is a primary
consideration, the underwriting process also includes a comparison of the
value of the security, if any, in relation to the proposed loan amount.

     Consumer loans may entail greater risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured, or
secured by rapidly depreciable assets, such as automobiles.  In such cases,
any repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation.  In addition,
consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be affected by adverse
personal circumstances.  Furthermore, the application of various federal and
state laws, including bankruptcy, may limit the amount which can be recovered
on such loans.  Although the level of delinquencies in the Bank's consumer
loan portfolio has generally been low (at December 31, 1997, approximately
$33,000, or .29% of the consumer loan portfolio, was 60 days or more
delinquent), there can be no assurance that delinquencies will not increase
in the future.

     LOAN SERVICING.  In addition to servicing its own loans, the Bank
services mortgage loans for others.  It is the practice of the Bank to sell
most fixed-rate loans and retain most adjustable-rate loans.  Most
conventional loans are sold to FNMA and the servicing is retained.  VA and
FHA loans are sold to private investors with the servicing released.  The fee
for selling loans with servicing released is generally 1/4% to 1 3/4%. The
Bank generally retains the servicing on conventional loans sold to FNMA and
receives a fee payable monthly of approximately 1/4% per annum of the unpaid
balance of each loan.  As of December 31, 1997, the Bank was servicing loans
for others in the amount of approximately $42.4 million.  These loans are not
reflected in the consolidated statement of financial condition.


ORIGINATIONS, PURCHASES AND SALES OF LOANS

     As described previously, the Bank originates loans through its marketing
efforts, its existing customer base, walk-in customers, and real estate
brokers and builders.  Commercial real estate loan originations are obtained
by direct solicitation.  The Bank originates both adjustable-rate and
fixed-rate loans. Its ability to originate loans is dependent upon the
relative customer demand in the origination market which is affected by
market conditions such as short-term and long-term interest rates as well as
the expected future level of interest rates.

     The Bank made no purchases or sales of pooled whole loans in 1997 and
had no commitments to purchase any loans or mortgage-backed securities at
December 31, 1997.  At the same date, the Bank had loan origination
commitments of $1,057,233 and commitments to sell residential loans of
$1,355,106.  The Bank expects to continue to sell part of its residential
mortgage loans in order to enhance liquidity and to maintain its risk-based
capital position.  This has generally been the procedure since 1991.  When
these loans are sold, the Bank usually retains the responsibility for
servicing the loans.

                                       11
<PAGE>

     The following table sets forth the principal amount of the Bank's loan
origination, purchase and sales activity for the periods indicated.

<TABLE>
                                                 Year Ended December 31
                                          -----------------------------------
                                            1997           1996        1995
                                          --------       --------    --------
                                                     (In Thousands)
<S>                                       <C>            <C>         <C>
Originations by loan type
Fixed-rate:
  Construction loans . . . . . . .        $  1,214       $  2,026    $    766
  Mortgage loans . . . . . . . . .          16,446         14,581       6,113
  Consumer loans . . . . . . . . .           7,680          7,146       4,055
  Loans refinanced . . . . . . . .          10,624          5,628       2,627
Adjustable-rate:
  Mortgage loans . . . . . . . . .             616            612         794
  Consumer loans . . . . . . . . .               1             18          11
  Loans refinanced . . . . . . . .              46            207         703
                                          --------       --------    --------

     Total loans originated. . . .          36,627         30,218      15,069
                                          --------       --------    --------
Purchases:
  Loans purchased. . . . . . . . .              --             --          --
                                          --------       --------    --------

Sales and repayments:
  Sales (1). . . . . . . . . . . .           8,770          8,913       7,504
  Principal repayments . . . . . .          15,239         10,602       8,651
                                          --------       --------    --------

     Total reductions. . . . . . .          24,009         19,515      16,155
                                          --------       --------    --------

Increase (decrease) in other
 items, net. . . . . . . . . . . .            (308)           264         (62)
                                          --------       --------    --------

     Net increase (decrease) . . .        $ 12,310       $ 10,967    $ (1,148)
                                          --------       --------    --------
                                          --------       --------    --------
</TABLE>

(1)  Consists entirely of one-to-four family fixed-rate loans


ASSET QUALITY

     DELINQUENT LOANS.  When a borrower fails to make a required payment on a
loan, the Bank attempts to cause the delinquency to be cured by contacting
the borrower.  In the case of residential loans, a late notice is sent 16
days after the due date.  If the delinquency is not cured by the thirtieth
day, contact with the borrower is made by telephone or a letter is sent.
Additional written and verbal contacts are made with the borrower between 35
and 70 days after the due date.

     In the event a real estate loan payment is past due for 45 days or more,
the Bank performs an in-depth review of the loan status, the condition of the
property and circumstances of the borrower.  Based upon the results of its
review, the Bank may negotiate and accept a repayment program with the
borrower, accept a voluntary deed in lieu of foreclosure or when deemed
necessary, initiate foreclosure proceedings.  If foreclosed on, real property
is sold at a public sale and the Bank may bid on the property to protect its
interest.  A decision as to whether and when to initiate foreclosure
proceedings is based on such factors as the amount of the outstanding loan in
relation to the original indebtedness, the extent of delinquency and the
borrower's ability and willingness to cooperate in curing delinquencies.

     Delinquent consumer loans are handled in a generally similar manner,
except that contacts are made beginning when the payment is 10 days past due.
If these efforts fail to bring the loan current, appropriate action

                                      12
<PAGE>

may be taken to collect any loan payment that remains delinquent.  The Bank's
procedures for repossession and sale of consumer collateral are subject to
various requirements under New Mexico consumer protection laws.  Loans are
generally placed on non-accrual status after 90 days delinquency or notice of
bankruptcy.

     The following table sets forth the Bank's loan delinquencies by type,
amount, and percentage of type at December 31, 1997.

<TABLE>
                                                Loans Delinquent For
                               -----------------------------------------------------
                                                                                         Total Loans Delinquent
                                      60-89 Days                90 Days And Over            60 Days or More
                               ------------------------     ------------------------    ------------------------
                                                Percent                     Percent                     Percent
                                                of loan                     of loan                     of loan
                               Number  Amount  category     Number  Amount  category    Number  Amount  category
                               ------  ------  --------     ------  ------  --------    ------  ------  --------
                                                                (In Thousands)
<S>                            <C>     <C>     <C>          <C>     <C>     <C>         <C>     <C>     <C>
Mortgage loans:
   One-to-four family. . . . .    3    $ 108     0.29%        --     $ --       --%         3    $ 108    0.29%
   Other dwelling units. . . .   --       --       --         --       --       --         --       --      --
   Commercial real estate. . .   --       --       --         --       --       --         --       --      --
Consumer loans . . . . . . . .    7       26     0.23          2        7     0.06          9       33    0.29
                                ---    -----                 ---     ----                 ---    -----
Total loans. . . . . . . . . .   10    $ 134     0.22%         2     $  7     0.01%        12    $ 141    0.24%
                                ---    -----                 ---     ----                 ---    -----
                                ---    -----                 ---     ----                 ---    -----
</TABLE>

     NON-PERFORMING ASSETS.  Non-performing assets consist of loans on which
interest is no longer being accrued, troubled debt restructurings, real
estate acquired by foreclosure or deed-in-lieu of foreclosure and repossessed
assets.

     The following table sets forth the amounts and categories of
non-performing assets in the Bank's portfolio.  Loans are generally placed on
non-accrual status after 90 days delinquency.

<TABLE>
                                                          December 31
                                                 ------------------------------
                                                  1997        1996        1995
                                                 ------     -------     -------
                                                        (In Thousands)
<S>                                              <C>        <C>         <C>
Non-accrual loans (1). . . . . . . . . .         $    7     $    53     $    --
Past due 90 days or more and still
  accruing . . . . . . . . . . . . . . .             --          --          --
Renegotiated loans (2) . . . . . . . . .             --       1,573       1,573
Real estate owned (3). . . . . . . . . .             76          86         114
                                                 ------     -------     -------

Total non-performing assets. . . . . . .         $   83     $ 1,712     $ 1,687
                                                 ------     -------     -------
                                                 ------     -------     -------
Ratio of non-performing assets to
  total assets . . . . . . . . . . . . .           0.08%       1.60%       1.44%
                                                 ------     -------     -------
                                                 ------     -------     -------
</TABLE>

(1)  Generally refers to loans that are contractually delinquent (i.e., payments
     were due and unpaid for more than 90 days).

(2)  The Bank's largest restructured note of approximately $1,533,000 originated
     in 1987 for $2,000,000 as a permanent loan on a shopping center of 47,457
     square feet, located on 56,943 square feet of land in Santa Fe, New Mexico.
     The terms of the note were modified in 1992 and an additional borrowers
     were added to the loan.  The interest rate of 5% in 1995 increased to 6% in
     1996 and escalated to 7% in 1997 with interest due monthly and principal
     reductions due at the end of each year.  The loan was renewed in 1997 at a
     market rate and is not considered a classified loan at December 31, 1997.

(3)  Refers to real estate acquired by the Bank through foreclosure or voluntary
     deed in lieu of loan foreclosure.

                                       13
<PAGE>

     For the year ended December 31, 1997, gross interest income which would
have been recorded had the non-accruing loans and renegotiated loans been
current in accordance with their original terms amounted to $124,518.  The
amount that was included in interest income on such loans was $117,181 for
the year ended December 31, 1997.

     CRITICIZED ASSETS.  Federal regulations provide for the classification
of loans and other assets, such as debt and equity securities considered by
the OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An
asset is considered "substandard" if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. "Substandard" assets include those characterized by the
"distinct possibility" that the insured institution will sustain "some loss"
if the deficiencies are not corrected. Assets classified as "doubtful" have
all of the weaknesses inherent in those classified "substandard," with the
added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions,
and values, "highly questionable and improbable."  Assets classified as
"loss" are those considered "uncollectible" and of such little value that
their continuance as assets without the establishment of a specific loss
reserve is not warranted.  Assets which do not currently expose the insured
institution to sufficient risk to warrant classification in one of the
aforementioned categories, but possess weaknesses, are required to be
designated "special mention" by management.

     When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses
in an amount deemed prudent by management.  General allowances represent loss
allowances which have been established to recognize the inherent risk
associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets.  When an insured
institution classifies problem assets as loss, it is required either to
establish a specific allowance for losses equal to 100% of that portion of
the asset so classified or to charge-off such amount.  An institution's
determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the regulatory authorities, who
may order the establishment of additional general or specific loss allowances.

     In connection with the filing of its periodic reports with the OTS and in
accordance with its classification of assets policy, the Bank regularly reviews
the problem loans in its portfolio to determine whether any loans require
classification in accordance with applicable regulations.  Criticized assets of
the Bank at December 31, 1997 were as follows:

<TABLE>
<CAPTION>

                                        December 31,
                                            1997
                                       --------------
                                       (In Thousands)
<S>                                    <C>

Substandard. . . . . . . . . . . . . . .  $  262
Doubtful . . . . . . . . . . . . . . . .      --
Loss . . . . . . . . . . . . . . . . . .      --
                                          ------
Total classified assets. . . . . . . . .     262
Special mention assets . . . . . . . . .   2,648
                                          ------
Total criticized assets. . . . . . . . .  $2,910
                                          ------
                                          ------

</TABLE>

     ALLOWANCE FOR LOAN LOSSES.  The allowance for loan losses is established
through a provision for loan losses based on management's quarterly asset
classification review and evaluation of the risk inherent in its loan
portfolio and changes in the nature and volume of its loan activity.  Such
evaluation, which includes a review of all loans of which full collectibility
may not be reasonably assured, considers among other matters, the estimated
value of the underlying collateral, economic conditions, cash flow analyses,
historical loan loss experience,

                                       14
<PAGE>

discussions held with delinquent borrowers and other factors that warrant
recognition in providing for an adequate loan allowance.  Although management
believes it uses the best information available to make such determinations,
future adjustments to reserves may be necessary, and net income could be
significantly affected, if circumstances differ substantially from the
assumptions used in making the initial determinations.  The Bank's quarterly
asset classification review determines which loans to charge-off.

The following table sets forth an analysis of
the Bank's allowance for loan losses for the years indicated.

<TABLE>
<CAPTION>
                                                            Year ended December 31
                                            -----------------------------------------------------
                                             1997         1996        1995        1994       1993
                                            -------      ------      ------      ------     -----
                                                                 (In Thousands)
<S>                                         <C>          <C>         <C>         <C>        <C>
Balance at beginning of year . . . . . .    $  429       $ 428       $ 461       $ 509      $535

Provision charged (credited) . . . . . .       118          14         (15)          4        21

Charge-offs:
Mortgage loans:
   Single family . . . . . . . . . . . .        (2)         --          --         (50)      (33)
   Commercial real estate. . . . . . . .        --          --          --          --        --
Consumer loans . . . . . . . . . . . . .       (60)        (18)        (21)         (3)      (33)

Recoveries:
Mortgage loans:
   Single family . . . . . . . . . . . .        21           2          --          --        --
   Commercial real estate. . . . . . . .        --          --          --                    --
Consumer loans . . . . . . . . . . . . .        21           3           3           1        19
                                            -------      ------      ------      ------     -----
Balances at end of year. . . . . . . . .    $  527       $ 429       $ 428       $ 461      $509
                                            -------      ------      ------      ------     -----
                                            -------      ------      ------      ------     -----
Ratio of net charge-offs during the
   period to average loans outstanding
   during the period . . . . . . . . . .       .04%        .03%        .05%        .14%      .11%
                                            -------      ------      ------      ------     -----
                                            -------      ------      ------      ------     -----
Allowance for loan losses to
   non-performing loans, at the end
   of the period . . . . . . . . . . . .    634.94%      25.06%      25.37%      12.29%     8.23%
                                            -------      ------      ------      ------     -----
                                            -------      ------      ------      ------     -----
Allowance for loan losses to total
   loans, at end of period . . . . . . .       .91%        .94%       1.25%       1.29%     1.38%
                                            -------      ------      ------      ------     -----
                                            -------      ------      ------      ------     -----
</TABLE>

                                     15
<PAGE>

INVESTMENT ACTIVITIES

     GENERAL.  The Bank has maintained high levels of investments that
qualify as liquid assets under OTS regulations.  Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans.  Historically, the Bank has
maintained liquid assets at levels above the minimum requirements imposed by
the OTS regulations and at levels believed adequate to meet the requirements
of normal operations, including repayments of maturing debt and potential
deposit outflows.  Cash flow projections are regularly reviewed and updated
to assure that adequate liquidity is maintained.  For the month of December
1997, the Bank's liquidity ratio (liquid assets as a percentage of net
withdrawable savings deposits and current borrowings) was 22.37%.

     Federally chartered thrift institutions have the authority to invest in
various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances,
repurchase agreements and federal funds. Subject to various restrictions,
federally chartered thrift institutions may also invest their assets in
commercial paper, investment grade corporate debt securities and mutual funds
whose assets conform to the investments that a federally chartered thrift
institution is otherwise authorized to make directly.

     Generally, the investment policy of the Bank is to invest funds among
various categories of investments and maturities based upon the Bank's
asset/liability management policies, investment quality and marketability,
liquidity needs and performance objectives.

     The Bank has a substantial portfolio of mortgage-backed securities.
Historically, most of the Bank's mortgage-backed securities were long-term,
fixed-rate federal agency securities.  In recent years, the Bank began to
purchase other types of mortgage-backed securities consistent with its
asset/liability management and balance sheet objectives.  At December 31,
1997, approximately $16 million or 49% of the Bank's mortgage-backed
securities carried adjustable rates of interest.  The Bank's recent policy is
to reduce mortgage-backed securities balances and increase loans for yield
enhancement. The Bank also has pooled fixed-rate loans in its existing loan
portfolio to create mortgage-backed securities.

     Under the OTS' risk-based capital requirements, GNMA mortgage-backed
securities have a zero percent risk-weighting and FNMA, FHLMC and AA- or
higher rated mortgage-backed securities have a 20% risk-weighting.  None of
the mortgage-backed securities held by the Bank had a risk-weight for
regulatory capital purposes above 20%.

     All of the Bank's mortgage-backed securities are backed by FHLMC, GNMA
or FNMA, or rated AA or higher.  Accordingly, management believes that the
Bank's mortgage-backed securities generally are resistant to credit problems.

     The Bank's holdings of mortgage-backed securities have decreased in
recent years primarily as a result of increase in the Bank's loan portfolio.
FHLMC, GNMA and FNMA mortgage-backed securities generally carry a yield
approximately 50 to 100 basis points below that of the corresponding type of
residential loan (due to the insurance or guarantee feature of such
securities and the retention of a servicing spread by the loan servicer), and
the Bank's other mortgage-backed securities also carry lower yields (because
such securities tend to have shorter actual durations than 30-year loans).
The Bank will continue to evaluate mortgage-backed securities purchases and
loan securitizations of its existing loans in the future based on its
strategic and asset/liability objectives, market conditions and alternative
investment opportunities.


                                      16
<PAGE>

     The following table sets forth the composition of the Bank's investment
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                     December 31
                                           --------------------------------------------------------------
                                                   1997                 1996                  1995
                                           ------------------   ------------------    -------------------
                                           Carrying    % of     Carrying    % of      Carrying     % of
                                            value      total      value      total     value       total
                                           --------    -----    --------    ------    --------     -----
                                                                    (In Thousands)
<S>                                        <C>         <C>      <C>         <C>       <C>          <C>
Available-for-sale:
Mortgage-backed securities:
  GNMA adjustable rate . . . . . . . . .   $  15,032   100.0%   $  23,640   100.0%    $  28,096     84.9%
Obligation of U.S. government agencies .          --       --          --       --        4,994      15.1
                                           ---------   ------   ---------   ------    ---------    ------
       Total available-for-sale. . . . .   $  15,032   100.0%   $  23,640   100.0%    $  33,090    100.0%
                                           ---------   ------   ---------   ------    ---------    ------
                                           ---------   ------   ---------   ------    ---------    ------
Held-to-maturity:
Mortgage-backed securities:
  FNMA participation certificates. . . .    $  4,362    23.0%    $  5,355    18.4%     $  6,225     17.1%
  FHLMC participation certificates . . .      12,942     68.3      21,896     75.2       27,873      76.6
  FHLMC adjustable rate. . . . . . . . .       1,643      8.7       1,862      6.4        2,306       6.3
                                           ---------   ------   ---------   ------    ---------    ------
       Total held-to-maturity. . . . . .      18,947   100.0%      29,113   100.0%       36,404    100.0%
                                           ---------   ------   ---------   ------    ---------    ------
                                                       ------               ------                 ------
FHLB stock . . . . . . . . . . . . . . .       1,667                1,572                 1,483
                                           ---------            ---------             ---------
Other interest-earning assets:
  Interest-bearing deposits with banks .       1,530                  381                   476
                                           ---------            ---------             ---------
       Total . . . . . . . . . . . . . .   $  37,176            $  54,706             $  71,453
                                           ---------            ---------             ---------
                                           ---------            ---------             ---------
Average remaining life excluding
  other-interest-earning assets and
  FHLB stock                                12 years             14 years              16 years
</TABLE>

     The following table sets forth the composition and contractual
maturities of the Bank's investment securities.
<TABLE>
<CAPTION>
                                                                               December 31, 1997
                                            --------------------------------------------------------------------------------
                                                                                                 Total investment securities
                                                                                                 ---------------------------
                                             Within    1 to 5   5 to 10    10 to 20   Over 20    Amortized         Market
                                            one year   years     years       years     years        cost           value
                                            --------  --------  --------   --------  ---------   ---------       ---------
                                                                        (In Thousands)
<S>                                         <C>       <C>       <C>        <C>       <C>         <C>              <C>
Available-for-sale:
Mortgage-backed securities:
   GNMA adjustable rate. . . . . .          $    --   $    --   $    --    $ 2,156   $ 12,880    $ 15,036        $  15,032
                                            --------  --------  --------   --------  ---------   ---------        ---------
      Total securities available-
        for-sale . . . . . . . . .          $    --   $    --   $    --    $ 2,156   $ 12,880    $ 15,036        $  15,032
                                            --------  --------  --------   --------  ---------   ---------        ---------
                                            --------  --------  --------   --------  ---------   ---------        ---------
Weighted average yield . . . . . .               --%       --%       --%      6.27%      6.70%       6.64%
                                            --------  --------  --------   --------  ---------   ---------
                                            --------  --------  --------   --------  ---------   ---------
</TABLE>

                                       17

<PAGE>
<TABLE>
<CAPTION>
                                                                              December 31, 1997
                                           --------------------------------------------------------------------------------
                                                                                                Total investment securities
                                                                                                ---------------------------
                                             Within    1 to 5   5 to 10    10 to 20   Over 20    Amortized        Market
                                            one year   years     years       years     years        cost          value
                                            --------  --------  --------   --------  ---------   ---------      ---------
                                                                        (In Thousands)
<S>                                         <C>       <C>       <C>        <C>       <C>         <C>            <C>
Held-to-maturity:
Mortgage-backed securities:
   FNMA participation certificates . .     $     --   $  4,362   $  --      $  --     $   --     $  4,362        $  4,306
   FHLMC participation certificates. .        8,248      4,694      --         --         --       12,942          12,882
   FHLMC adjustable-rate certificates.           --         --      --         --      1,643        1,643           1,615
                                           --------   --------   ------     ------    ------     --------        --------
     Total securities held-to-maturity     $  8,248   $  9,056   $  --      $  --     $1,643     $ 18,947        $ 18,803
                                           --------   --------   ------     ------    ------     --------        --------
                                           --------   --------   ------     ------    ------     --------        --------
Weighted average yield . . . . . . . .         4.65%      5.72%     --  %      --  %    5.85%        5.27%
                                           --------   --------   ------     ------    ------     --------        --------
                                           --------   --------   ------     ------    ------     --------        --------
</TABLE>

     OTHER INVESTMENTS.  At December 31, 1997, the Bank's interest bearing
deposits with banks was $1,530,000 or 1.43% of total assets.  As of such
date, the Bank also had a $1,667,434 investment in FHLB stock, satisfying its
requirement for membership in the FHLB of Dallas.  It is the Bank's general
policy to purchase investment securities which are U.S. Government securities
and federal agency obligations and other issues that are rated investment
grade or have credit enhancements.  The Bank's investment securities
portfolio at December 31, 1997 was entirely comprised of securities issued by
the United States Government, or its agencies.

SOURCES OF FUNDS

     THE COMPANY.  The Company's primary source of funds are dividends from
the Bank, of which none have been paid to date, borrowings from the Bank in
the form of advances ($0 at December 31, 1997), and outside borrowings.

     On February 12, 1997, the Company obtained a line of credit in the
amount of $100,000 from a correspondent bank for six months at a market rate
of interest, the funds of which were to be used for general corporate
purposes. The line of credit expired in August 1997 with no amounts being
borrowed by the Company.

     THE BANK.  The Bank's primary sources of funds are deposits,
amortization and prepayment of loan principal, sales or maturities of loans,
investment securities, mortgage-backed securities and short-term investments,
borrowings and funds provided from operations.

     Borrowings, predominantly from the FHLB of Dallas, may be used on a
short-term basis to compensate for seasonal reductions in deposits or deposit
inflows at less than projected levels, and may be used in the future on a
longer-term basis to support lending and investing activities.

     The Bank offers a variety of deposit accounts having a wide range of
interest rates and terms.  The Bank's deposits consist of statement savings,
NOW accounts and money market accounts and CDs.  The Bank relies primarily on
advertising, competitive pricing policies and customer service to attract and
retain these deposits. The Bank solicits deposits from its primary market
area only and does not use brokers to obtain deposits.

     The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition.  To maintain proper capital ratios and improve its net interest
margin, management decided in 1995 to be less aggressive in bidding for
public fund deposits and the decline in deposits is partially attributed to
that strategic plan as well as management's overall strategy to change

                                       18


<PAGE>

the product mix offered to its customers.  The policy was discontinued during
1997 as the capital ratios of the Bank improved.

     Management believes that customers continue to place a value on federal
insurance on deposit accounts and that, to the extent the Bank maintains
competitive rates, it will be able to maintain its deposit and liquidity
levels. The Bank manages the pricing of its deposits in keeping with its
asset/liability management and profitability objectives.

     Based on its experience, the Bank believes that its savings accounts,
interest-bearing and non-interest-bearing checking accounts are relatively
stable sources of deposits.  However, the ability of the Bank to attract and
maintain CDs, and the rates paid on these deposits, has been and will
continue to be significantly affected by market conditions.

     The following tables set forth the deposits in the various programs
offered by the Bank at the dates indicated:

<TABLE>

                  Balance at                       Balance at                         Balance at                       Balance at
                 December 31,   % of     Increase  December 31,  % of     Increase   December 31,  % of     Increase   December 31,
                    1997      deposits  (decrease)    1997      deposits  (decrease)      1997    deposits  (decrease)     1994
                 -----------  --------  ---------- -----------  --------  ---------- -----------  --------  ---------- -----------
                                                                 (In Thousands)
<S>              <C>          <C>       <C>         <C>         <C>       <C>        <C>          <C>       <C>        <C>
Transactional
 accounts          $ 9,985     10.25%   $ 1,569    $ 8,416       8.57%   $    453    $  7,963      7.19%    $   298    $  7,665
Jumbo CDs            8,296      8.52        574      7,722       7.87      (5,173)     12,895     11.66         (64)     12,959
Savings accounts     6,927      7.11     (1,394)     8,321       8.48        (960)      9,281      8.39      (1,979)     11,260
Money market
 deposit accounts   15,711     16.13      5,200     10,511      10.71        (903)     11,414     10.32      (2,353)     13,767
IRA accounts         9,451      9.70       (360)     9,811       9.99        (512)     10,323      9.33          (4)     10,327
Other CDs           47,042     48.29     (6,341)    53,383      54.38      (5,374)     58,757     53.11       1,962      56,795
                   -------    ------    -------    -------     ------    --------    --------    ------     -------    --------
                   $97,412    100.00%   $  (752)   $98,164     100.00%   $(12,469)   $110,633    100.00%    $(2,140)   $112,773
                   -------    ------    -------    -------     ------    --------    --------    ------     -------    --------
                   -------    ------    -------    -------     ------    --------    --------    ------     -------    --------
</TABLE>
                                       19
<PAGE>
<TABLE>
                              December 31, 1997               December 31, 1996               December 31, 1995
                         ---------------------------     ---------------------------     ---------------------------
                         Weighted                        Weighted                        Weighted
                          average         Percentage      average         Percentage      average         Percentage
Minimum                  interest          of total      interest          of total      interest          of total
amount     Category        rate   Balance  deposits        rate   Balance  deposits        rate   Balance  deposits
------     --------       ------  -------  --------       ------  -------  --------       ------  -------  --------
                                                               (In Thousands)
<S>      <C>              <C>     <C>      <C>            <C>     <C>      <C>            <C>     <C>      <C>
$  100   Transactional
          accounts
          zero-rate        0.00%  $ 3,226    3.32%         0.00%  $ 1,516    1.54%       0.00%  $    576    0.52%
   100   Transactional
          accounts         1.12     6,759    6.94          1.63     6,900    7.03        2.47      7,387    6.68
 1,000   Money market      3.05     6,030    6.19          3.06     9,647    9.83        3.65     11,414   10.32
   100    Savings
          accounts         2.50     6,927    7.11          2.50     8,321    8.48        2.75      9,281    8.39
 2,500   Access money
          market           4.50     9,681    9.94          4.57       864    0.88          --         --      --

         Certificates
          of Deposit
 1,000   30-60 day CDs     3.04        63    0.06          3.03       175    0.18        4.31        376    0.34
 1,000   91 day CDs        3.65       599    0.61          3.71     1,110    1.13        4.52      1,465    1.32
 1,000   6 month CDs       4.66    13,864   14.23          4.60    15,407   15.70        5.05     15,928   14.40
 1,000   1 year CDs        4.88    17,127   17.59          4.82    18,164   18.51        5.57     20,422   18.46
 1,000   18 month CDs      4.95     1,607    1.65          5.05     1,662    1.69        5.56      2,131    1.93
 1,000   2 year CDs        4.96     3,656    3.75          5.54     4,574    4.66        5.08      5,819    5.26
 1,000   30 month CDs      5.19     3,068    3.15          5.81     4,265    4.34        5.62      4,407    3.98
 1,000   3 year CDs          --        --      --            --        --      --        8.00          5    0.00
 1,000   4 year CDs        5.69     2,371    2.43          5.59     3,045    3.10        5.65      3,276    2.96
 1,000   5 year CDs        5.70     4,687    4.81          5.77     4,981    5.07        5.90      5,028    4.54
90,000   Jumbo CDs         5.27     8,296    8.52          5.01     7,722    7.87        5.67     12,795   11.57
   100   IRA floating
          rate             5.05     4,217    4.33          5.05     4,733    4.82        5.24      5,169    4.67
   100   1 year IRA        5.04     2,024    2.08          5.03     1,993    2.03        5.74      1,932    1.75
   100   2 year IRA        5.57        94     .10            --        --      --          --         --      --
   100   3 year IRA        5.72     1,154    1.18          5.40     1,582    1.61        5.34      1,875    1.69
   100   5 year IRA        5.87     1,962    2.01          5.85     1,503    1.53        6.13      1,347    1.22
                           ----   -------  ------          ----   -------  ------        ----   --------  ------
                           4.24%  $97,412  100.00%         4.31%  $98,164  100.00%       4.69%  $110,633  100.00%
                           ----   -------  ------          ----   -------  ------        ----   --------  ------
                           ----   -------  ------          ----   -------  ------        ----   --------  ------
</TABLE>



     The following table sets forth the savings flows of the Bank during the
periods indicated.  Net deposits (withdrawals) refer to the amount of
deposits during a period less the amount of withdrawals during the same
period.  Deposit flows at savings institutions may also be influenced by
external factors such as governmental credit policies and, particularly in
recent periods, depositors' perceptions of the adequacy of federal insurance
of accounts.

<TABLE>
                                              Year Ended December 31
                                        ---------------------------------
                                          1997        1996         1995
                                        --------    --------     --------
                                                   (In Thousands)
<S>                                     <C>         <C>          <C>
Net deposits (withdrawals)
 before interest credited               $(3,783)    $(17,178)    $(7,452)
Interest credited                         3,031        4,709       5,312
                                        -------     --------     -------
    Net decrease in savings deposits    $  (752)    $(12,469)    $(2,140)
                                        -------     --------     -------
                                        -------     --------     -------
Percent decrease                          (0.77)%     (11.27)%     (1.90)%
</TABLE>

                                      20

<PAGE>

     The following table shows interest rate and maturity information for the
Bank's CDs as of December 31, 1997.

<TABLE>
                            0.00-     3.00-       5.00-      7.00-               Percent
                            2.99%     4.99%       6.99%      8.99%      Total    of total
                            -----     -----       -----      -----      -----    --------
                                                         (In Thousands)
Certificate accounts
maturing in quarter
ending:
--------------------
<S>                         <C>     <C>         <C>         <C>       <C>        <C>
March 31, 1998 . . . . .    $  8    $ 10,724    $  8,150    $   99    $ 18,981     29.29%
June 30, 1998. . . . . .      --      11,129       6,119        --      17,248     26.62
September 30, 1998 . . .      --       4,285       3,544        14       7,843     12.11
December 31, 1998. . . .      --       3,738       4,116        --       7,854     12.12
March 31, 1999 . . . . .      --         668       1,020       324       2,012      3.11
June 30, 1999. . . . . .      --         734       1,019        --       1,753      2.71
September 30, 1999 . . .      --         311         796        --       1,107      1.71
December 31, 1999. . . .      --         390         793        --       1,183      1.83
March 31, 2000 . . . . .      --          98         810       176       1,084      1.67
June 30, 2000. . . . . .      --         242         823        47       1,112      1.72
September 30, 2000 . . .      --           4         353        --         357      0.55
December 31, 2000. . . .      --         126         426        --         552      0.85
Thereafter . . . . . . .      --          42       3,661        --       3,703      5.71
                            ----    --------    --------    ------    --------    ------
  Total. . . . . . . . .    $  8    $ 32,491    $ 31,630    $  660    $ 64,789    100.00%
                            ----    --------    --------    ------    --------    ------
                            ----    --------    --------    ------    --------    ------
  Percent of total . . .      01%      50.15%      48.82%     1.02%     100.00%
                            ----    --------    --------    ------    --------
                            ----    --------    --------    ------    --------
</TABLE>

     The following table indicates the amount of the Bank's CDs by size or
from public entities, by time remaining until maturity as of December 31,
1997.

<TABLE>
                                                             Maturity
                                    ------------------------------------------------------------
                                                    Over       Over
                                    3 months       3 to 6     6 to 12       Over
                                    or less        months      months     12 months      Total
                                    --------     --------     --------    ---------     --------
                                                           (In Thousands)
<S>                                 <C>          <C>          <C>          <C>          <C>
CDs less than $100,000 . . . . .    $ 18,009     $ 16,087     $ 15,148     $ 11,904     $ 61,148

CDs of $100,000 or more. . . . .         472          338          549          959        2,318

Public funds(1). . . . . . . . .         500          823           --           --        1,323
                                    --------     --------     --------    ---------     --------
Total CDs and public funds . . .    $ 18,981     $ 17,248     $ 15,697     $ 12,863     $ 64,789
                                    --------     --------     --------    ---------     --------
                                    --------     --------     --------    ---------     --------
</TABLE>

-----------------
(1)  Certificates of deposit from government and other public entities.

                                      21
<PAGE>

     From time to time, the Bank has had greater amounts of public funds.
The amount of public funds held by the Bank at December 31, 1997 and 1996 was
$2,129,114 and $726,268, respectively.  The Bank is required to pledge
collateral against such funds equal to 100% of such funds.

     BORROWINGS.  Although deposits are the Bank's primary source of funds,
the Bank's policy has been to utilize borrowings when there is a net outflow
of deposits, when advances are a less costly source of funds or when funds
from advances can be invested at a positive spread.  In addition, the Bank
has relied upon selected borrowings for short-term liquidity needs.

     The Bank may obtain advances from the FHLB of Dallas upon the security
of its capital stock of the FHLB of Dallas and certain of its mortgage loans,
investment securities and mortgage-backed securities.  Such advances may be
made pursuant to several different credit programs, each of which has its own
interest rate and range of maturities.  At December 31, 1997, the Bank had no
FHLB borrowings outstanding.

     During fiscal 1997, the Bank utilized advances from FHLB of Dallas to
cover net deposit outflows and, to a lesser extent, partially fund mortgage
loans.

     The following table sets forth maximum balance, average balance, and
average rate paid on FHLB advances for the period indicated.

<TABLE>
                                                         Year ended December 31
                                                     ------------------------------
                                                       1997       1996       1995
                                                     -------    -------    --------
                                                             (In Thousands)
<S>                                                  <C>        <C>        <C>
Maximum amount of borrowings outstanding             $ 4,100    $ 3,900    $ 7,400

Approximate average borrowings outstanding           $   231    $   459    $ 1,305

Approximate weighted average interest rate paid         5.64%      5.38%      6.13%
</TABLE>

SUBSIDIARY OF THE BANK

     In 1974, the Bank incorporated First Equity Development Corporation
("FEDCO"), a New Mexico corporation, as a wholly-owned subsidiary of the
Bank. The directors and officers of FEDCO also serve as officers of the Bank.
Prior to 1991, FEDCO's primary business was real estate acquisition,
development and construction, and investment in the Bank's former data
processing service bureau.  FEDCO had $913 and $1,697 in cash at December
31, 1997 and 1996, respectively, and no other assets or liabilities and is
currently an inactive corporation.  Thrift institutions are permitted to
invest an amount equal to 2% of their assets, through a subsidiary, with an
additional investment of 1% of assets where such investment serves primarily
community, inner-city and community development purposes.

REGULATION

     GENERAL.  The Bank is subject to extensive regulation, examination and
supervision by the OTS, as its chartering agency, and the FDIC, as its
deposit insurer.  The Bank's deposit accounts are insured up to applicable
limits by the SAIF administered by the FDIC, and it is a member of the FHLB
of Dallas.  The Bank must file reports with the OTS and the FDIC concerning
its activities and financial condition, and it must obtain regulatory
approvals prior to entering into certain transactions, such as mergers with,
or acquisitions of, other depository institutions.  The OTS and the FDIC
conduct periodic examinations to assess the Bank's compliance with various
regulatory requirements.  Such regulation and supervision establish a
comprehensive framework of activities in which an institution may engage and
are intended primarily for the protection of the insurance fund and
depositors.  The Company, as a unitary thrift holding company, is required to
file certain reports with, and otherwise comply with, the rules and
regulations of the OTS and of the Securities and Exchange Commission
("Commission") under the federal securities laws.

                                      22
<PAGE>

     The OTS and the FDIC have significant discretion in connection with
their supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets and the
establishment of adequate loan loss reserves for regulatory purposes.  Any
change in such regulation and policies, whether by the OTS, the FDIC or
action of the United States Congress, could have a material adverse impact on
the Company, the Bank and the operations of both.

     The Bank was subject to an Amended Prompt Corrective Action Directive
dated August 1994 and a Supervisory Agreement dated June 1996 mainly directed
to the improvement of capital ratios, plan and asset/liability management
issues. These agreements were terminated by the OTS in November 1997.

     REGULATION OF THE COMPANY.  The Company, as a unitary thrift holding
company, is a savings and loan holding company within the meaning of HOLA.
As such, the Company is required to register with the OTS and is subject to
OTS regulations, examinations, supervision and reporting requirements.  In
addition, the OTS has enforcement authority over the Company and its
non-thrift subsidiaries, if any.  Among other things, this authority permits
the OTS to restrict or prohibit activities that are determined to be a
serious risk to the financial safety, soundness or stability of a subsidiary
savings association.

     Except under limited circumstances, thrift holding companies are
prohibited from acquiring, without prior approval of the OTS, control of any
other savings institutions or thrift holding company or substantially all the
assets thereof or more than five percent of the voting shares of a thrift
institution or holding company thereof which is not a subsidiary.  In
evaluating an application by a holding company to acquire a thrift
association, the OTS must consider the financial and managerial resources and
future prospects of the company and thrift association involved, the effect
of the acquisition on the risk to the insurance funds, the convenience and
needs of the community and competitive factors.  Acquisitions which result in
a thrift holding company controlling thrift associations in more than one
state are generally prohibited except in supervisory transactions involving
failing savings associations or based on specific state authorization to
permit such acquisitions.

     Federal law also requires OTS approval prior to any change of control of
the Company or the Bank. Under OTS regulations, "control" is presumed to
exist if an individual or company acquires more than twenty-five percent of
any class of voting stock of a thrift association or holding company.
Control is also presumed to exist, subject to being rebutted, if a person
acquires more than ten percent of any class of voting stock (or more than
twenty-five percent of any class of non-voting stock) and is subject to any
of several control factors, including, among other matters, the relative
ownership position of a person, the existence of control agreements and other
factors.

     As a unitary thrift holding company, the Company generally will not be
restricted under existing laws to the types of business activities in which
it may engage, provided that the Bank continues to satisfy the QTL test. Upon
any non-supervisory acquisition by the Company of another thrift or savings
bank that meets the QTL test and is deemed to be a savings association by the
OTS and that will be held as a separate subsidiary, the Company would become
a multiple thrift holding company and would be subject to limitations on the
types of business activities in which it could engage.  HOLA generally limits
the activities of a multiple thrift holding company and its non-insured
association subsidiaries primarily to activities permissible for bank holding
companies under the Bank Holding Company Act, subject to the prior approval
of the OTS, and to other activities authorized by OTS regulation.

     A thrift association or a thrift holding company is required to give 30
days prior written notice to the OTS of any proposed appointment of a
director or senior executive officer if the institution has been chartered
less than two years, has undergone a change in control within the preceding
two years, or is not in compliance with the minimum capital requirements or
otherwise is in a troubled condition.  The OTS then has the opportunity to
disapprove any such appointment.

     Transactions between the Bank and the Company and its other subsidiaries
are subject to various conditions and limitations.  The Bank will be required
to give 30 days written notice to the OTS prior to any declaration of the
payment of any dividends or other capital distributions to the Company.

                                      23
<PAGE>

     FEDERAL SECURITIES LAW.  The stock of the Company is registered with the
Commission under the Exchange Act ("Exchange Act").  The Company is subject
to the information, proxy solicitation, insider trading restrictions and
other requirements of the Commission under the Exchange Act.

     Company stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Bank may not be resold without
registration or unless sold in accordance with certain resale restrictions.
If the Company meets specified current public information requirements, each
affiliate of the Company is able to sell in the public market, without
registration, a limited number of shares in any three-month period.

     INSURANCE OF ACCOUNTS AND REGULATIONS BY THE FDIC.  The Bank is a member
of the SAIF, which is administered by the FDIC.  Deposits are insured up to
applicable limits by the FDIC and such insurance is backed by the full faith
and credit of the United States Government.  As insurer, the FDIC imposes
deposit insurance premiums and is authorized to conduct examinations of and
to require reporting by FDIC-insured institutions.  It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a serious risk to the FDIC.  The FDIC also has
the authority to initiate enforcement actions against thrift associations,
after giving the OTS an opportunity to take such action, and may terminate
the deposit insurance if it determines that the institution has engaged or is
engaging in unsafe or unsound practices, or is in an unsafe or unsound
condition.

     The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation.  Under the system, institutions
classified as well capitalized (i.e., a core capital ratio of at least 5%, a
ratio of Tier 1 or core capital to risk-weighted assets of at least 6% and a
risk-based capital ratio of at least 10%) and considered healthy pay the
lowest premium, while institutions that are less than adequately capitalized
(i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium.  Risk classification of all
insured institutions will be made by the FDIC for each semi-annual assessment
period.

     Legislation to recapitalize the SAIF was enacted in September 1996.  The
legislation provided for a one-time assessment imposed on all deposits
assessed at the SAIF rates, as of March 31, 1995, in order to recapitalize
the SAIF.  It also provided for the merger of the BIF and the SAIF on January
1, 1999 if no savings associations then exist.  The special assessment rate
was established at .657% of deposits by the FDIC and the resulting assessment
on the Bank of $762,000 was paid in November 1996.  This special assessment
significantly increased noninterest expense and adversely affected the Bank's
results of operations for the year ended December 31, 1996.  As a result of
the special assessment, the Bank's deposit insurance premiums were reduced in
1997 and again in 1998 based upon its current risk classification and the new
assessment schedule for SAIF insured institutions.

     Prior to the enactment of the legislation, a portion of the SAIF
assessment imposed on savings associations was used to repay obligations
issued by a federally chartered corporation to provide financing (FICO) for
resolving the thrift crisis in the 1980's.  Although the FDIC has proposed
that the SAIF assessment be equalized with the BIF assessment schedule,
effective October 1, 1996, SAIF-insured institutions will continue to be
subject to a FICO assessment as a result of this continuing obligation.
Although the legislation also now requires assessments to be made on
BIF-assessable deposits for this purpose, effective January 1, 1997, that
assessment will be limited to 20% of the rate imposed on SAIF assessable
deposits until the earlier of December 31, 1999 or when no savings
association continues to exist, thereby imposing a greater burden on SAIF
member institutions such as the Bank.  Thereafter, however, assessments on
BIF-member institutions will be made on the same basis as SAIF-member
institutions.  The rates to be established by the FDIC to implement this
requirement for all FDIC-insured institutions is uncertain at this time, but
are anticipated to be about a 6.3 basis points assessment on SAIF deposits
and 1.26 basis points on BIF deposits until BIF insured institutions
participate fully in the assessment.

                                      24
<PAGE>

     REGULATORY CAPITAL REQUIREMENTS.  Federally insured thrift associations,
such as the Bank, are required to maintain a minimum level of regulatory
capital.  The OTS has established capital standards, including a tangible
capital requirement, a leverage ratio (or core capital) requirement and a
risk-based capital requirement applicable to such thrift associations.  These
capital requirements must be generally as stringent as the comparable capital
requirements for national banks.  The OTS is also authorized to impose
capital requirements in excess of these standards on individual associations
on a case-by-case basis.

     The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation).  Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income.  Intangible
assets including disallowed servicing assets and disallowed deferred tax
assets are deducted from capital to calculate adjusted tangible capital.

     The OTS regulations establish special capitalization requirements for
thrift associations that own subsidiaries.  Under these regulations certain
subsidiaries are consolidated for capital purposes and others are excluded
from assets and capital.  In determining compliance with the capital
requirements, all subsidiaries engaged solely in activities permissible for
national banks or engaged in certain other activities solely as agent for its
customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership, including the
assets of includable subsidiaries in which the association has a minority
interest that is not consolidated for generally accepted accounting
principles ("GAAP") purposes. For excludable subsidiaries, the debt and
equity investments in such subsidiaries are deducted from assets and capital,
with a five-year transition period beginning on July 1, 1990, for investments
made before April 12, 1989. At December 31, 1997, the Bank had tangible
capital of $7,966,049 or 7.51% of adjusted total assets, which was $6,374,636
above the minimum requirement of 1.5% of adjusted total assets in effect on
that date.

     The capital standards also require core capital equal to at least 3% of
adjusted total assets (as defined by regulation).  Core capital generally
consists of tangible capital plus certain intangible assets, including a
limited amount of purchased credit card relationships.  A thrift association
must maintain a core capital ratio of at least 4% to be considered adequately
capitalized unless its supervisory condition is such to allow it to maintain
a 3% ratio.  At December 31, 1997, the Bank had core capital equal to
$7,966,049 or 7.51% of adjusted total assets, which was $4,783,224 above the
minimum leverage ratio requirement of 3% as in effect on that date.

     The OTS risk-based requirement requires thrift associations to have
total capital of at least 8% of risk-weighted assets.  Total capital consists
of core capital, as defined above, and supplementary capital. Supplementary
capital consists of certain permanent and maturing capital instruments that
do not qualify as core capital and general valuation loan and lease loss
allowances up to a maximum of 1.25% of risk-weighted assets. Supplementary
capital may be used to satisfy the risk-based requirement only to the extent
of core capital.  The OTS is also authorized to require a thrift association
to maintain an additional amount of total capital to account for
concentration of credit risk and the risk of non-traditional activities.  At
December 31, 1997, the Bank had no capital instruments that qualify as
supplementary capital.  In addition, general loss reserves at that date were
less than 1.25% of risk-weighted assets.

     Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital.  Such exclusions consist of equity
investment (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments.  The Bank had no such
exclusions from capital and assets at December 31, 1997.

     In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, will be multiplied by a risk weight, ranging
from 0% to 100%, based on the risk inherent in the type of asset.  For
example, the OTS has assigned a risk weight of 50% for prudently underwritten
permanent one-to-four family first lien mortgage loans not more than 90 days
delinquent and having a loan to value ratio of not more than 80% at
origination unless insured to such ratio by an insurer approved by the FNMA
or FHLMC.

     At December 31, 1997, the Bank had risk-based capital of $8,493,396 or
16.81% of risk-weighted assets. This amount was $4,450,596 above the 8%
requirement in effect on that date.

                                      25
<PAGE>

     The OTS has adopted a rule that requires every thrift association with
more than normal interest rate risk to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to
50% of its interest rate risk exposure multiplied by the present value of its
assets.  This exposure is a measure of the potential decline in the net
portfolio value of a thrift association, greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease
in interest rates (whichever results in a greater decline).  Net portfolio
value is the present value of expected cash flows from assets, liabilities
and off-balance sheet contracts.  The rule provides for a two quarter lag
between calculating interest rate risk and recognizing any deduction from
capital.  Any thrift association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless
the OTS determines otherwise.  Currently, the Bank is exempt from this rule.

     The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against thrift associations that fail to
meet their capital requirements.  The OTS is generally required to take
action to restrict the activities of an "undercapitalized association"
(generally defined to be one with less than either a 4% core capital ratio, a
4% Tier 1 risked-based capital ratio or an 8% risk-based capital ratio).  Any
such association must submit a capital restoration plan and until such plan
is approved by the OTS may not increase its assets, acquire another
institution, establish a branch or engage in any new activities, and
generally may not make capital distributions.  The OTS is authorized to
impose the additional restrictions, discussed below, that are applicable to
significantly undercapitalized associations.

     As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that is will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.

     Any thrift association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions.  These actions and restrictions include requiring the issuance
of additional voting securities; limitations on asset growth; mandated asset
reduction; changes in senior management; divestiture, merger or acquisition
of the association; restrictions on executive compensation; and any other
action the OTS deems appropriate.  An association that becomes "critically
undercapitalized" (i.e., a tangible capital ratio of 2% or less) is subject
to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations.  In addition, the
OTS must appoint a receiver (or conservator with the concurrence of the FDIC)
for a thrift association, with certain limited exceptions, within 90 days
after it becomes critically undercapitalized.

     Any undercapitalized association is also subject to other possible
enforcement actions by the OTS or the FDIC.  Such actions could include a
capital directive, a cease-and-desist order, civil money penalties, the
establishment of restrictions on all aspects of the Bank's operations or the
appointment of a receiver or conservator or a forced merger into another
institution.

     If the OTS determines that an association is in an unsafe or unsound
condition or is engaged in an unsafe or unsound practice, it is authorized to
reclassify a well-capitalized association as an adequately capitalized
association and if the association is adequately capitalized, to impose the
restrictions applicable to an undercapitalized association.  If the
association is undercapitalized, the OTS is authorized to impose the
restrictions applicable to a significantly undercapitalized association.

     The imposition by the OTS or the FDIC of any of these measures on the
Bank may have a substantial adverse effect on the Company's operations and
profitability.  The Company's shareholders do not have preemptive rights, and
therefore, if the Bank is directed by the OTS or the FDIC to issue additional
shares of Common Stock, such issuance may result in the dilution in the
percentage of ownership of the Bank.

     LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS.  OTS
regulations impose various restrictions on thrift associations with respect
to their ability to make distributions of capital, which include dividends,
stock redemptions or repurchases, cash-out mergers and other transactions
charged to the capital account.  OTS

                                      26
<PAGE>

regulations also prohibit a thrift association from declaring or paying any
dividends or from repurchasing any of its stock if, as a result, the
regulatory capital of the association would be reduced below the amount
required to be maintained for the liquidation account established in
connection with its mutual to stock conversion.

     Generally, thrift associations, such as the Bank, that before and after
the proposed distribution meet their capital requirements, may make capital
distributions during any calendar year equal to the greater of 100% of net
income for the year-to-date plus 50% of the amount by which the lesser of the
association's tangible, core or risk-based capital exceeds its capital
requirement for such capital component, as measured at the beginning of the
calendar year, or requirement for such capital component, as measured at the
beginning of the calendar year, or 75% of its net income for the most recent
four quarter period.  However, an association deemed to be in need of more
than normal supervision by the OTS may have its dividend authority restricted
by the OTS.  The Bank may pay dividends in accordance with this general
authority.

     Thrift associations proposing to make any capital distributions need
only submit written notice to the OTS 30 days prior to such distribution.
Thrift associations that do not, or would not meet their current minimum
capital requirements following a proposed capital distribution, however, must
obtain OTS approval prior to making such distribution.  The OTS may object to
the distribution during that 30 day period notice based on safety and
soundness concerns.

     The OTS has proposed regulations that would revise the current capital
distribution restrictions.  Under the proposal a thrift association may make
a capital distribution without notice to the OTS (unless it is a subsidiary
of a holding company) provided that it has a CAMELS 1 or 2 rating, is not of
supervisory concern and would remain adequately capitalized (as defined in
the OTS prompt corrective action regulations) following the proposed
distribution. Thrift associations that would remain adequately capitalized
following the proposed distribution but do not meet the other noted
requirements must notify the OTS 30 days prior to declaring a capital
distribution.  The OTS stated it will generally regard as permissible that
amount of capital distributions that do not exceed 50% of the institution's
excess regulatory capital plus net income to date during the calendar year.
A thrift association may not make a capital distribution without prior
approval of the OTS and the FDIC if it is undercapitalized before, or as a
result of, such a distribution.  As under the current rule, the OTS may
object to a capital distribution if it would constitute an unsafe or unsound
practice.  No assurance may be given as to whether or in what form the
regulations may be adopted.

     LIQUIDITY.  All thrift associations, including the Bank, are required to
maintain an average daily balance of liquid assets equal to a certain
percentage of the sum of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less.  This liquid
asset ratio requirement may vary from time to time (between 4% and 10%)
depending upon economic conditions and savings flows of all thrift
associations.  At the present time, the minimum liquid asset ratio is 4%.

     In addition, short-term liquid assets (i.e., cash, certain time
deposits, etc.) currently must constitute 1% of the Bank's average daily
balance of net withdrawable deposit accounts and current borrowings.
Penalties may be imposed upon associations for violations of either liquid
asset ratio requirement.  At December 31, 1997, the Bank was in compliance
with both requirements, with an overall liquid asset ratio of 22.37% and
short-term liquid assets ratio of 5.29%.

     ACCOUNTING.  An OTS policy statement applicable to all savings
associations clarifies and re-emphasizes that the investment activities of a
thrift association must be in compliance with approved and documented
investment policies and strategies, and must be accounted for in accordance
with GAAP. Under the policy statement, management must support its
classification of and accounting for loans and securities (i.e., whether held
for investment, sale or trading) with appropriate documentation.  The Bank is
in compliance with this policy statement.

     The OTS had adopted an amendment to its accounting regulations to
require that transactions be reported in a manner that best reflects their
underlying economic substance and inherent risk and that financial reports

                                      27
<PAGE>

must incorporate any other accounting regulations or orders prescribed by the
OTS.  Such regulations may result in reporting transactions in a manner that
is more stringent than may be required by GAAP.

     QUALIFIED THRIFT LENDER TEST.  All thrift associations, including the
Bank, are required to meet a QTL test to avoid certain restrictions on their
operations.  This test requires a savings association to have at least 65% of
its portfolio assets (as defined by regulation) in qualified thrift
investments on a monthly average for nine out of every 12 months on a rolling
basis.  As an alternative, the thrift association may maintain 60% of its
assets in those assets specified in Section 7701(a)(19) of the Internal
Revenue Code.  Under either test, such assets primarily consist of
residential housing related loans and investments.  At December 31, 1997, the
Bank met the QTL test and has always met the test since its inception.

     Any thrift association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains
a QTL.  Requalification as a QTL is restricted to one time only.  If an
association does not requalify and converts to a national bank charter, it
must remain SAIF-insured until the FDIC permits it to transfer to the BIF.
If an association that fails the test has not yet requalified and has not
converted to a national bank, its new investments and activities are limited
to those permissible for both a thrift association and a national bank, and
it is limited to national bank branching rights in its home state.  In
addition, the association is immediately ineligible to receive any new FHLB
borrowings and is subject to national bank limits for payment of dividends.
If such association has not requalified or converted to a national bank
within three years after the failure, it must divest of all investments and
cease all activities not permissible for a national bank.  In addition, it
must repay promptly any outstanding FHLB borrowings, which may result in
prepayment penalties.  If any association that fails the QTL test is
controlled by a holding company, then within one year after the failure, the
holding company must register as a bank holding company and become subject to
all restrictions on bank holding companies.

     COMMUNITY REINVESTMENT ACT.  Under the CRA, every FDIC insured
institution has a continuing and affirmative obligation consistent with safe
and sound banking practices to help meet the credit needs of its entire
community, including low and moderate income neighborhoods.  The CRA does not
establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the
types of products and services that it believes are best suited to its
particular community, consistent with the CRA.  The CRA requires the OTS, in
connection with the examination of the Bank, to assess the institution's
record of meeting the credit needs of its community and to take such record
into account in its evaluation of certain applications, such as a merger or
the establishment of a branch, by the Bank. An unsatisfactory rating may be
used as the basis for the denial of an application by the OTS.  The most
recent CRA examination as of September 30, 1996 classified the Bank as
satisfactory.

     The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA.  Due to the heightened attention being given to the
CRA in the past few years, the Bank may be required to devote additional
funds for investment and lending in its local community.

     TRANSACTIONS WITH AFFILIATES.  Generally, transactions between a thrift
association or its subsidiaries and its affiliates are required to be on
terms as favorable to the association as transactions with non-affiliates.
In addition, certain of these transactions, such as loans to an affiliate,
are restricted to a percentage of the association's capital.  Affiliates of
the Bank include the Company and any company which is under common control
with the Bank. In addition, a thrift association may not lend to any
affiliate engaged in activities not permissible for a bank holding company or
acquire the securities of most affiliates.  The OTS has the discretion to
treat subsidiaries of thrift associations as affiliates on a case-by-case
basis.

     Certain transactions with directors, officers of controlling persons are
also subject to conflict of interest regulations enforced by the OTS.  These
conflict of interest regulations and other statutes also impose restrictions
on loans to such persons and their related interests.  Among other things,
such loans must be made on terms

                                      28
<PAGE>

substantially the same as for loans to unaffiliated individuals.  At December
31, 1997, loans to directors, executive officers, and major stockholders were
$984,434.

     FEDERAL HOME LOAN BANK SYSTEM.  The Bank is a member of the FHLB of
Dallas which is one of 12 regional FHLBs that administer the home financing
credit function of thrift associations.  Each FHLB serves as a reserve or
central bank for its members within its assigned region.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of
the FHLB System. It makes loans to members (i.e., advances) in accordance
with policies and procedures established by the board of directors of the
FHLB.  These policies and procedures are subject to the regulation and
oversight of the Federal Housing Finance Board.  All advances from the FHLB
are required to be fully secured by sufficient collateral as determined by
the FHLB.  In addition, all long-term advances are required to provide funds
for residential home financing.

     Under federal law, the FHLBs are required to provide funds for the
resolution of troubled thrift associations and to contribute to low- and
moderately-priced housing programs through direct loans or interest subsidies
on advances targeted for community investment and low- and moderate-income
housing projects. These contributions have affected adversely the level of
FHLB dividends paid and could continue to do so in the future.  These
contributions could also have an adverse effect on the value of FHLB stock in
the future.  A reduction in value of the Bank's FHLB stock may result in a
corresponding reduction in the Bank's capital.

     As a member, the Bank is required to purchase and maintain stock in the
FHLB of Dallas.  At December 31, 1997, the Bank had $1,667,434 in FHLB stock,
which was in compliance with this requirement.  The Bank has received
dividends on its FHLB stock, which have averaged 5.38% over the past five
calendar years and were 5.95% for calendar year 1997.

     For the year ended December 31, 1997, stock and cash dividends paid by
the FHLB of Dallas to the Bank totaled $95,290 which constitutes a $6,180
increase from the amount of dividends received in fiscal year 1996. The
$24,739 dividend received for the quarter ended December 1997 reflects an
annualized rate of 6.00% or .10% above the rate for calendar 1996.

     REGULATORY ENVIRONMENT FOR 1998.  It is anticipated that in 1998 the
regulator agendas will continue to focus on three major areas:  regulatory
compliance, financial management, and cost control.

     The major issues to be reviewed in each of these areas are as follows:

     * REGULATORY COMPLIANCE.  Regulatory compliance should focus on four main
                               areas:

       **  Risk management in all areas of banking with specific attention
           to compliance and fair lending.
       **  Nondeposit investment products sold only by broker-dealers or
           properly licensed registered representatives and proper
           disclosures or no FDIC insurance of these products.
       **  Enhancement of individual financial privacy as it relates to new
           home banking, interest banking and smart card usage products.
       **  Expansion of goals geared to establish know-your-customer policy
           to prevent fraud, protect safety and soundness of the institution,
           and protect name and reputation of the Bank.

     * FINANCIAL MANAGEMENT.  Regulations governing investment securities are
       scheduled for review by the regulatory agencies.  Regulators also may
       finalize proposals for measuring interest rate risk for risk-based
       capital purposes.  The Financial Accounting Standards Board ("FASB")
       is likely to take further action in the area of market valuation, as
       well as in the areas of financial statement disclosures, and
       accounting for derivatives and hedging activities.  Banks' use of
       simple gap models for asset/liability management may be reviewed
       again by regulators.  Falling rates may adversely affect any
       concentrated investment by banks in mortgage-backed securities.

                                      29
<PAGE>

     -  COST CONTROL.  Reengineering of retail delivery systems, focus on the
        customer, customer and product profitability models, and a new emphasis
        on the internal audit function all should get attention during 1998.

     In addition, the Federal Reserve and the Office of Comptroller of the
Currency issued new risk management guidelines, which they began using in 1996
as part of a new rating system for the banks they examine.  The FDIC informally
has been following a similar approach of managing bank risk for some time now.

     The federal banking agencies' new management guidelines measure a bank's
control of six different types of risks:

     -  Credit risk                -  Operational risk
     -  Market risk                -  Legal risk
     -  Liquidity risk             -  Reputation risk

According to the new guidelines, effective control of each of these must
include:

-    Active board and senior management oversight
-    Adequate policies, procedures, and limits
-    Adequate risk measurement, monitoring, and management information systems
     Comprehensive internal controls

     This new approach for examiners incorporates all-inclusive measurement
guidelines of the risks associated with managing a bank, and they represent a
major shift in regulatory risk assessment: from activities (i.e., commercial
loans, investing in mortgage-backed securities, etc.) to risk exposures.  This
shift might result in many changes in examination procedures and bank evaluation
standards.

     It is also anticipated that much legislative time will be devoted to the
issues of changing the Glass-Stegall Act and Bank Holding Company Act to permit
common ownership of commercial banks, securities firms and insurance companies.

FEDERAL AND STATE TAXATION

     FEDERAL TAXATION.  Prior to the enactment of recent legislation (discussed
below), thrift associations such as the Bank that met certain definitional tests
relating to the composition of assets and other conditions prescribed by the
Internal Revenue Code of 1986, as amended (the "Code"), had been permitted to
establish reserves for bad debts and to made annual additions thereto which
could, within specified formula limits, be taken as a deduction in computing
taxable income for federal income tax purposes.  The amount of the bad debt
reserve deduction for "non-qualifying loans" was computed under the experience
method.  The amount of the bad debt reserve deduction for "qualifying real
property loans" (generally loans secured by improved real estate) is computed
under the experience method.

     In August 1996, legislation was enacted that repeals the percentage of
taxable income method of accounting used by many thrifts to calculate their bad
debt reserve for federal income tax purposes.  As a result, small thrifts must
recapture that portion of the reserve that exceeds the amount that could have
been taken under the experience method for post-1987 tax years.  The legislation
also requires thrifts to account for bad debts for federal income tax purposes
on the same basis as commercial banks for tax years beginning after December 31,
1995.  The recapture will occur over a six-year period, the commencement of
which will be delayed until the first taxable year beginning after December 31,
1997, provided the institution meets certain residential lending requirements.
The legislation did not have a material impact on the Bank.


                                      30

<PAGE>

     In addition, to regular income tax, corporations, including thrift
institutions such as the Bank, generally are subject to a minimum tax.  An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption.  The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income.  For taxable years beginning
after 1986 and before 1996, corporations, including thrift associations such as
the Bank, are also subject to an environmental tax equal to 0.12% of the excess
of alternative minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.

     To the extent earnings appropriated to a thrift institution's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the thrift's supplemental reserves for
losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a stockholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad
debt losses).  As of December 31, 1997, the Bank had no Excess.  Under
present law should the Bank cease to be a thrift institution, the Company
would be required to recapture the Bank's bad debt reserves in its Excess.

     At December 31, 1997, the Company had remaining net operating loss ("NOL")
carryforwards of approximately $6,150,000 for federal income tax purposes which
expire in varying amounts through 2010.  The Company also has a capital loss
carryforward of $88,000 for tax purposes which will expire in 1998 and 1999.  In
addition, the alternative minimum tax ("AMT") NOL carryforward and AMT credit
carryforward were approximately $6,630,000 and $101,000, respectively, which
expire in varying amounts through 2010.  Investment tax credit carryforwards of
approximately $40,000 expire in varying amounts through 2005.  At December 31,
1997, the Bank had remaining NOL carryforwards of approximately $40,965,000 for
state income tax purposes which expire in varying amounts through 2005.  These
state NOL carryforwards are substantially more than the federal NOL
carryforwards as a result of the exclusion of U.S. investment security and other
income for state income tax purposes.

     Section 382 of the Internal Revenue Code ("Code") provides that the
aforementioned tax NOL carryforwards would be subjected to an annual limitation
should there be a change of over 50% in the stock ownership of the Company
during any three year testing period.  Due to the fact that the Company has a
tax NOL carryforward, it is required to report changes in ownership of 5% or
greater of stockholders annually to the Internal Revenue Service.  The statute
and applicable Treasury regulations are extremely complex.  The Company believes
that no change of ownership as defined in applicable Section 382 regulations
occurred through the three-year testing period ended December 31, 1997.
However, if such a change in ownership occurs, the annual use of the tax NOL
carryforwards would be subject to an annual limitation.

     The Company files consolidated federal income tax returns with the Bank and
its subsidiary on a fiscal year basis using the accrual method of accounting.
The Bank's federal income tax returns have not been examined by the Internal
Revenue Service since 1990.  With respect to years examined by the IRS, either
all deficiencies have been satisfied or sufficient reserves have been
established to satisfy asserted deficiencies.  In the opinion of management, any
examination of still open returns (including returns of subsidiaries and
predecessors of, or entities merged into, the Bank) would not result in a
deficiency which could have a material adverse effect on the financial condition
or results of operations of the Company and its consolidated subsidiary.

     STATE TAXATION.  As a Delaware holding company, the Company is exempted
from Delaware corporate income tax but is required to file an annual report with
and pay an annual fee to the State of Delaware.  The Bank is also subject to an
annual franchise tax imposed by the State of Delaware.


                                      31

<PAGE>

     The State of New Mexico has a corporate tax which subjects the Bank's New
Mexico taxable income to tax rates ranging from 4.8% to 7.65%.  New Mexico
taxable income is computed by applying certain modifications to federal taxable
income.  The principal difference between state and federal taxable income is
that interest earned on U.S. government obligations is not taxable for state
purposes.

     The Bank's income tax returns have not been audited by state authorities
during the past five years.

NEW ACCOUNTING STANDARDS

     In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 125, ACCOUNTING FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES,
which was amended in December 1996.  The Statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities.  The Company was required to adopt certain
provisions of SFAS No. 125 for the year beginning January 1, 1997 and certain
other provisions of the Statement for the year beginning January 1, 1998.  The
adoption of the applicable provision in 1997 did not have a material impact on
the Company's financial position or results of operations.  The adoption of the
applicable provisions of this new standard, as amended, in 1998, is not expected
to have a material impact on the Company's financial position or results of
operations.

     In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE.  This
Statement establishes standards for computing and presenting earnings per share
("EPS") and simplifies the standards for computing earnings per share previously
found in Accounting Principles Board ("APB") Opinion No. 15, EARNINGS PER SHARE.
SFAS No. 128 supersedes APB Opinion No. 15 and its interpretations and
supersedes or amends other accounting pronouncements related to current
computations of EPS.  The Statement replaced the presentation of primary EPS
with a presentation of basic EPS.  It also requires dual presentation with equal
prominence of basic and diluted EPS for income from continuing operations and
for net income on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.  Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.  The provisions of
SFAS No. 128 are effective for financial statements for both interim and annual
periods ending after December 15, 1997, or for the year ended December 31, 1997,
for the Company, with all prior period EPS data restated to conform with SFAS
No. 128.  The adoption of this Statement has been reflected in this report and,
in managements opinion, did not significantly change the results of previously
reported EPS data.

     In February 1997, the FASB issued SFAS No. 129, DISCLOSURE OF INFORMATION
ABOUT CAPITAL STRUCTURE.  This Statement establishes standards for disclosing
information about an entity's capital structure.  This Statement requires an
entity to disclose in its financial statements the pertinent rights and
privileges of the various securities outstanding and the number of shares upon
conversion, exercise, or satisfaction of required conditions during at least the
most recent annual fiscal period and any subsequent interim period presented.
This Statement also requires disclosure relative to liquidation preference of
preferred stock and redeemable stock.  The provisions of SFAS No. 129 are
effective for periods ending after December 15, 1997. The adoption of this
Statement, in managements opinion, did not result in any significant disclosures
in addition to those already contained in the Company's financial statements.

     In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME.
This Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.  Comprehensive
income is the total of reported net income and all other revenues, expenses,
gains and losses that under generally accepted accounting principles bypass
reported net income.  SFAS No. 130 requires that comprehensive income be
reported in a financial statement that is displayed with the same


                                      32

<PAGE>

prominence as other financial statements with the aggregate amount of
comprehensive income reported in that same financial statement.  SFAS No. 130
permits the statement of changes in stockholders' equity to be used to meet
this requirement. Companies are encouraged, but not required, to display the
components of other comprehensive income below the total for net income in
the statement of operations or in a separate statement of comprehensive
income.  Companies are also required to display the cumulative total of other
comprehensive income for the period as a separate component of equity in the
statement of financial position.  This Statement is effective for fiscal
years beginning after December 15, 1997, or January 1, 1998, for the Company,
with earlier application permitted.  Companies are also required to report
comparative totals for comprehensive income in interim reports.  Management
of the Company will adopt the provisions of this Statement, which are only of
a disclosure nature, effective January 1, 1998.

     In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION.  This Statement supersedes SFAS No. 14,
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE, and utilizes the
"management approach" for segment reporting.  The management approach is based
on the way that the chief operating decision maker organizes segments within a
company for making operating decisions and assessing performance.  Reportable
segments are based on any manner in which management disaggregates its company
such as by products and services, geography, legal structure and management
structure.  SFAS No. 131 requires disclosures for each segment that are similar
to those required under current standards with the addition of quarterly
disclosure requirements and more specific and detailed geographic disclosures
especially by countries as opposed to broad geographic regions.  This Statement
also requires descriptive information about the way the operating segments were
determined, the products/services provided by the operating segments, the
differences between the measurements used in reporting segment information and
those used in general purpose financial statements, and the changes in the
measurement of segment amounts from period to period.  The provisions of SFAS
No. 131 are effective for fiscal years beginning after December 15, 1997, or
January 1, 1998, for the Company, with earlier application permitted.  SFAS No.
131 does not need to be applied to interim statements in the initial year of
application but such comparative information will be required in interim
statements for the second year.  Comparative information for earlier years must
be restated in the initial year of application.  Management of the Company will
adopt the provisions of this Statement, which are only of a disclosure nature,
effective January 1, 1998.

COMPETITION

     The Bank's primary service area, which presently represents the principal
operating activities of the Company, includes the New Mexico counties of
Bernalillo, Cibola, Curry, De Baca, Los Alamos, Roosevelt, Sandoval, Santa Fe,
Torrance, Valencia, and the Texas counties of Parmer and Bailey.  The Bank
attracts all of its deposits and loans through its branch offices and loan
production office, primarily from the communities in which those branch offices
are located; therefore, competition for those deposits is principally from other
thrift institutions and commercial banks located in the same communities as well
as brokerage firms and insurance companies.

EMPLOYEES

     As of December 31, 1997, the Bank had 52 full-time and 15 peak-time
employees.  The Bank's employees are not represented by any collective
bargaining group.  Management considers its employee relations to be good.


                                      33

<PAGE>

ITEM 2.   DESCRIPTION OF PROPERTY

     The Company's principal asset is the common stock of the Bank.

     The following table sets forth information relating to each of the Bank's
current offices.  Net book value and total investment figures are for land,
building, furniture and fixtures.

<TABLE>
                                                 Net book value at     Branch deposits at
Location                       Date acquired   December 31, 1997 (1)    December 31, 1997
---------------------------    -------------   ---------------------   -------------------
<S>                            <C>             <C>                     <C>
MAIN OFFICE:
806 Pile Street                     1966           $  987,775             $  52,550,891
Clovis, New Mexico

BRANCH OFFICES:
Prince and Parkland Streets         1978              338,127                13,619,419
Clovis, New Mexico

400 West First Street               1982              679,940                31,241,695
Portales, New Mexico

LOAN PRODUCTION OFFICE:
4061 Ridgerock Road, Suite C        1996               48,405 (2)           Not applicable
Rio Rancho, New Mexico
</TABLE>

(1)  The book value of the Bank's investment in land, premises and equipment,
less accumulated depreciation, totaled $2,054,247 at December 31, 1997.

(2)  The book value of the Bank's investment is for equipment and furniture.
The office building is under an operating lease.

ITEM 3.   LEGAL PROCEEDINGS

     The Company and its subsidiary are from time to time parties to various
legal actions arising in the normal course of business.  Management believes
that there is no proceeding threatened or pending against the Company or its
subsidiary which, if determined adversely, would have a material adverse effect
on the financial condition or results of operations of the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     Not applicable


                                      34

<PAGE>

                                      PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Common Stock of the Bank was traded in the over-the-counter market on
the NASDAQ Small Cap Market under the symbol "FSBC" prior to October 21, 1996,
and the Common Stock of the Company has been traded in the over-the-counter
market on the NASDAQ Small Cap Market under the symbol "AABC" since October 21,
1996.  As of March 27, 1998, the Company had 1,217,336 shares of common stock
outstanding and 444 holders of record.

     The following table sets forth the high and low sales prices of the Common
Stock of the Company and the Common Stock of the Bank prior to the formation of
the Company as a unitary thrift holding company as quoted on the NASDAQ Small
Cap Market.

<TABLE>
                                             Price range
                                  -----------------------------------
                                                             Cash
                                                           Dividends
                                    High        Low        per share*
                                  -------     -------      ----------
<S>                               <C>         <C>          <C>
1996
  First Quarter                   $  7.25     $  6.00          --
  Second Quarter                  $  7.00     $  5.50          --
  Third Quarter                   $  6.00     $  5.25          --
  Fourth Quarter                  $  6.00     $  5.50          --

1997
  First Quarter                   $  6.25     $  5.25          --
  Second Quarter                  $  5.94     $  5.25          --
  Third Quarter                   $  8.25     $  6.00          --
  Fourth Quarter                  $ 11.38     $  7.75          --
</TABLE>


*Does not reflect 2% stock dividend declared on October 31, 1997 and issued on
December 1, 1997.

     For a foreseeable period of time, the principal source of cash revenues to
the Company will be dividends paid by the Bank with respect to the Bank's common
stock.  There are certain statutory and regulatory limitations on the payment of
such dividends (and other capital distributions) including OTS regulatory
capital requirements. In some cases, the OTS may prohibit a dividend payment
that meets these requirements on the basis that such a distribution would be an
unsafe or unsound practice.  Furthermore, the Bank may not pay a dividend if it
will cause the institution to become "undercapitalized."

     The Bank is required to give the OTS thirty days prior notice of the
proposed declaration by its directors of any dividend.  Any such dividend
declared within the thirty day period or without giving such notice shall be
invalid and shall confer no rights or benefits on the Company as the sole
stockholder of the Bank.

     Under the Federal Deposit Insurance Act, an insured bank is prohibited from
paying dividends on its capital stock while in default in the payment of any
assessment due to the FDIC except in those cases where the amount of the
assessment is in dispute and the insured bank has deposited satisfactory
security.  The Bank is not in default in the payment of any such assessment.

     The Bank last paid a stock dividend in 1989 and a cash dividend in 1988.
The Company's Board of Directors does not currently intend to declare any cash
dividends at any time in the foreseeable future.  However, in October 1997, the
Board of Directors declared a 2% common stock dividend payable December 1, 1997
to shareholders of record as of October 31, 1997.


                                      35

<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS

     The Company became the unitary thrift holding company for the Bank as a
result of the consummation of an Agreement and Plan of Reorganization and
related Plan of Merger on October 21, 1996 (the "Merger"). The Company did not
have any material assets prior to the Merger.  Following the Merger, the
Company's consolidated statement of financial condition and statement of
operations are not materially different from the Bank's statement of financial
condition and statement of operations.  The Company is the successor registrant
to the Bank under the Securities Act of 1933.  The following table sets forth
selected consolidated historical financial and operating data for the Company as
of and for each of the five fiscal years ended December 31, 1997 and has been
derived from and should be read in conjunction with the audited consolidated
financial statements of the Company.  The following summary financial
information is qualified in its entirety by and should be read in conjunction
with the detailed information and financial statements of the Company, including
the notes thereto, which information as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997, are included in
this Form 10-KSB.


<TABLE>
                                                 For the years ended December 31
                                       ----------------------------------------------------
SELECTED CONSOLIDATED OPERATING DATA:    1997        1996      1995       1994      1993
                                       ---------  --------   --------   --------   --------
                                                (In Thousands Except Per Share Data)
<S>                                    <C>        <C>        <C>        <C>        <C>
Income statement data:
  Interest income                      $  7,250   $  7,473   $  8,417   $  7,888   $  8,538
  Interest expense                        4,149      4,717      5,423      4,563      4,943
                                       --------   --------   --------   --------   --------
  Net interest income before
     provision for loan losses            3,101      2,756      2,994      3,325      3,595
  Provision for loan losses                 118         14        (15)         4         21
                                       --------   --------   --------   --------   --------
Net interest income after
  provision for loan losses               2,983      2,742      3,009      3,321      3,574
  Net gain (loss) on mortgage
     loans held-for-sale                    149        141        118        (19)       331
  Net gain on sale of securities             21         --         --          5        258
  Real estate operations, net                (3)       (43)       (58)      (273)      (616)
  Other income, net                         697        664        716        752        744
  Other expenses                         (3,463)    (4,238)    (3,371)    (3,635)    (3,677)
                                       --------   --------   --------   --------   --------
Income (loss) before income taxes           384       (734)       414        151        614
  Income tax expense (benefit)           (1,212)        --         --       (189)        --
                                       --------   --------   --------   --------   --------
Net income (loss)                      $  1,596   $   (734)  $    414   $    340   $    614
                                       --------   --------   --------   --------   --------
                                       --------   --------   --------   --------   --------
Per share data:
  Earnings per common share            $   1.40   $  (1.01)  $   0.58   $   0.48   $   0.87
                                       --------   --------   --------   --------   --------
                                       --------   --------   --------   --------   --------
  Earnings per common
     share-assuming dilution           $   1.37   $  (1.01)  $   0.58   $   0.48   $   0.87
                                       --------   --------   --------   --------   --------
                                       --------   --------   --------   --------   --------
</TABLE>


                                      36

<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL
 CONDITION DATA:
                                                            December 31
                                   ---------------------------------------------------------
                                       1997        1996       1995        1994       1993
                                   ---------   ---------   ---------   ---------   ---------
                                                     (In Thousands)
<S>                                <C>         <C>         <C>         <C>         <C>
Loans receivable, net              $  58,172   $  45,596   $  34,332   $  35,670   $  36,980
Loans held-for-sale                      298         564         862         671       4,861
Securities held-to-maturity           18,947      29,113      36,404      77,505      65,909
Securities available-for-sale         15,032      23,640      33,090       2,980      10,722
Real estate owned, net                    76          86         114         421       2,967
Total assets                         107,213     106,853     116,966     125,709     136,338
Deposits                              97,412      98,164     110,633     112,773     130,690
Borrowings                                --       3,000          --       7,400          --
Net unrealized depreciation
  on available-for-sale
  securities, net                         (3)       (199)       (204)       (363)        (28)
Stockholders' equity                   9,145       5,086       5,620       5,048       5,043


SELECTED FINANCIAL RATIOS AND
 OTHER DATA:
                                       1997        1996       1995        1994       1993
                                   ---------   ---------   ---------   ---------   ---------
PERFORMANCE RATIOS:
  Return on assets (ratio of
    net income/(loss)to average
    total assets)                       1.49%      (0.66)%      0.34%       0.26%       0.45%
  Interest rate spread information:
    Average during period               2.91        2.43        2.45        2.62        2.89
    End of period                       3.01        2.68        2.13        2.42        2.88
  Net interest margin (1)               3.08        2.54        2.54        2.64        2.83
  Ratio of operating expense to
    average total assets                3.24        3.83        2.83        2.98        3.12
  Return on equity (ratio of net
    income/(loss) to average equity)   22.43      (13.70)       7.75        6.73       12.93

QUALITY RATIOS:
  Non-performing assets to
    total assets at end of year          .08%       1.60%       1.44%       2.98%       4.54%
  Allowance for loan losses
    to non-performing loans           635.36       25.07       25.36       12.29        8.22
  Allowance for loan losses
    to total loans                      0.91        0.94        1.25        1.29        1.38

CAPITAL RATIOS:
  Equity to total assets at
    the end of year                     8.53%       4.76%       4.81%       4.02%       3.70%
  Average equity to average assets      6.65        4.78        4.40        3.85        3.45
  Ratio of average
    interest-earning assets to
    average interest-bearing
    liabilities                       103.86      102.55      101.99      100.66       98.29


</TABLE>

(1)  Net interest income divided by average interest earning assets


                                      37

<PAGE>

GENERAL

     The Company is a Delaware corporation which was organized in 1996 for
the purpose of becoming the thrift holding company of the Bank.  The Bank is
a federally chartered stock savings bank conducting business from three
banking locations in Clovis and Portales, New Mexico and a loan production
office in Rio Rancho, New Mexico.  The Bank has a wholly-owned subsidiary,
FEDCO, which is currently inactive.

     The Bank is principally engaged in the business of attracting retail
deposits from the general public and investing those funds in first mortgage
loans in owner occupied, single-family residential loans and mortgage-backed
securities.  To a lesser extent, the Bank originates residential construction
loans and commercial real estate loans. The Bank also originates consumer
loans, including loans for the purchase of automobiles and home improvement
loans, and commercial loans including SBA loans.

     The most significant outside factors influencing the operations of the
Bank and other financial institutions include general economic conditions,
competition in the local market place and the related monetary and fiscal
policies of agencies that regulate financial institutions.  More
specifically, the cost of funds, primarily consisting of deposits, is
influenced by interest rates on competing investments and general market
rates of interest.  Lending activities are influenced by the demand for real
estate financing and other types of loans, which in turn is affected by the
interest rates at which such loans may be offered and other factors affecting
loan demand and funds availability.

     In order to continue to meet the financial services needs of the
communities it serves, the Bank intends to continue to grow in a reasonable,
prudent manner which may include expansion of the existing branch network.
Prior to the Conversion, such growth was limited due to capital restrictions.
As a part of this intended growth, the Bank has increased the portfolio
allocation of single-family lending, consumer lending and commercial lending.
Certain improvements have been completed and should assist in the expansion
of the Bank's core deposit base.

     Growth of the Bank may be financed by either increasing the deposit
portfolio or from borrowed funds.  The use of borrowed funds to purchase
short duration, mortgage-backed securities or single family mortgage loans
may be considered to add to the Bank's portfolio.

     Loan servicing has been one of the stable income providers for the Bank
and will continue to be expanded, to the extent possible, through the
retention of servicing for loans originated and sold into the secondary
market.

     The Company's strategic plan will continue to be reviewed quarterly for
progress by the Board of Directors.  The Board will modify the plan as deemed
appropriate to reflect the operational environment of the Bank.

     Interest rates decreased moderately during the fiscal year December 31,
1997, and had some apparent impact on lending.  The Bank had a higher volume
of permanent single family lending activity, resulting in a net gain on sale
of loans and an increase to loans receivable.  In a declining rate
environment, prices for loans sold in the secondary market normally increase
and generally create a gain when the loans are sold.  Since rates decreased
moderately, the Bank was able to generate gains on loans sold in the
secondary market.  In addition, the Bank has been able to generate new
sources of consumer lending and commercial real estate lending to compliment
the volume of permanent single family lending.

     Prepayment tendencies on loans and mortgage-backed securities may vary
from historical experience and depositors' preference for various deposit
products and maturities may also vary.  The Bank's favorable liquidity
position of 22.37% allows some flexibility in adjusting to cash flow
requirements brought on by interest rate changes.  The Bank's one year
interest-rate sensitivity gap was a negative 4.03% of total assets as
December 31, 1997.  A negative gap indicates there are more interest-bearing
liabilities repricing during a stated period than interest-earnings assets.

                                      38
<PAGE>

     At December 31, 1997, the Bank had unrealized gains and losses in its
mortgage-backed securities portfolio which are being held to maturity.  The
Bank has both the intent and ability to hold these securities until maturity.
In addition, management believes the Bank will be able to collect all
amounts due according to the contractual terms of the debt securities and is
not aware of any information that would indicate the inability of any issuer
of such securities to make contractual payments in a timely manner.  As such
the Bank believes that these unrealized losses will not ultimately be
realized and therefore, should be recognized in the financial statements
since such losses are not other than temporary.

     All of the Bank's mortgage-backed securities are agency securities and
are either guaranteed by the full faith and credit of the United States
Government (GNMA) or are insured by a Government Sponsored Enterprise (FNMA &
FHLMC).  None of these securities are considered "high risk" as defined by
the OTS and none have failed to pass the Federal Financial Institution
Examination Council (FFIEC) mandatory test for "high risk" securities.  The
Bank does not invest in such "high risk" securities.

     Management of the investment portfolio is not designed to be the primary
source of funds for the Bank's operations.  Rather, it is viewed as a use of
funds generated by the Bank to be invested in interest-earning assets to be
held-to-maturity or available-for-sale.  Cash flow mismatches between sources
and uses of funds should not require any of the securities to be liquidated.
While cash flows from the securities varies depending on the prepayment
speeds associated with each particular security, the variance in the
prepayment speeds does not impact the over-all cash flow needs of the Bank
since the Bank has the ability to borrow funds from the FHLB of Dallas.  See
LIQUIDITY AND CAPITAL RESOURCES in this Form 10K-SB.

REGULATORY MATTERS

     The Bank was subject to an Amended Prompt Corrective Action Directive
dated August 1994 and a Supervisory Agreement dated June 1996 mainly directed
to the improvement of capital ratios, plan and asset/liability management
issues. These agreements were terminated by the OTS in November 1997.













                                      39
<PAGE>

RESULTS OF OPERATIONS

     Operating results are impacted by many factors, the most important
factor being the interest spread between the yield on loans and investments
and the cost of funds.  The following table presents for the periods
indicated the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars
and rates.  No tax equivalent adjustments were made and all average balances
are monthly average balances.  Non-accruing loans have been included in the
table as loans carrying a zero yield.

<TABLE>
                                                                    Year ended December 31,
                                                                        (In Thousands)
                              -----------------------------------------------------------------------------------------------------
                                           1997                               1996                               1995
                              -------------------------------   --------------------------------   --------------------------------
                                Average    Interest               Average     Interest               Average     Interest
                              outstanding   earned/    Yield/   outstanding    earned/    Yield/   outstanding    earned/    Yield/
                                balance      paid       rate      balance       paid       rate      balance       paid       rate
                              -----------  --------    ------   -----------   --------    ------   -----------   --------    ------
<S>                           <C>          <C>         <C>      <C>           <C>         <C>      <C>           <C>         <C>
Interest-earning assets:
  Loans receivable (1)          $ 52,909    $ 4,490     8.49%    $ 40,095     $ 3,477      8.67%    $ 36,856     $ 3,643       9.88%
  Mortgage-backed securities      42,019      2,379     5.66       59,161       3,434      5.80       69,759       4,060       5.82
Investment securities              1,607        104     6.46        5,028         293      5.83        8,185         516       6.30
Other interest-earning assets      4,238        277     6.54        4,193         269      6.42        3,119         198       6.35
                                --------    -------     -----    --------     -------      -----    --------     -------       -----
     Total interest-earning
       assets (1)               $100,773    $ 7,250     7.19%    $108,477     $ 7,473      6.89%    $117,919     $ 8,417       7.14%
                                --------    -------     -----    --------     -------      -----    --------     -------       -----
                                --------    -------     -----    --------     -------      -----    --------     -------       -----
Interest-bearing liabilities:
  Savings deposits              $ 96,798    $ 4,136     4.27%    $105,319     $ 4,692      4.46%    $114,315     $ 5,343       4.67%
  Federal Home Loan Bank
   advances                          231         13     5.64          459          25      5.47        1,305          80       6.13
                                --------    -------     -----    --------     -------      -----    --------     -------       -----
     Total interest-bearing
      liabilities               $ 97,029    $ 4,149     4.28%    $105,778     $ 4,717      4.46%    $115,620     $ 5,423       4.69%
                                --------    -------     -----    --------     -------      -----    --------     -------       -----
                                --------    -------     -----    --------     -------      -----    --------     -------       -----
Net interest income                         $ 3,101                           $ 2,756                            $ 2,994
                                            -------                           -------                            -------
                                            -------                           -------                            -------
Net interest rate spread                                2.91%                              2.43%                               2.45%
                                                        -----                              -----                               -----
                                                        -----                              -----                               -----
Net interest-earning assets     $  3,744                         $  2,699                           $  2,299
                                --------                         --------                           --------
                                --------                         --------                           --------
Net yield
  on average interest-earning
  assets                                                3.08%                              2.54%                               2.54%
                                                        -----                              -----                               -----
                                                        -----                              -----                               -----
Average interest-earning
  assets to average
  interest-bearing liabilities              103.86%                           102.55%                            101.99%
                                            -------                           -------                            -------
                                            -------                           -------                            -------
</TABLE>

(1)  Calculated net of loans in process

                                      40
<PAGE>

     The following table presents the weighted average yields earned on loans,
investments, and other interest-earning assets, and the weighted average rates
paid on deposits and borrowings and the resultant interest rate spreads at the
dates indicated.  Weighted average rates are based on the balances at the end of
the period.

<TABLE>
                                                       At  December 31,
                                               ------------------------------
                                               1997          1996       1995
                                               -----        -----       -----
<S>                                            <C>          <C>         <C>
WEIGHTED AVERAGE YIELD ON:
  Loans receivable                             8.31%        8.59%       8.90%
  Mortgage-backed securities                   5.56         5.84        5.90
  Investment securities and other
     interest-earning assets                   6.94         6.24        6.15
                                               -----        -----       -----
COMBINED WEIGHTED AVERAGE YIELD ON
  INTEREST-EARNING ASSETS                      7.26%        7.11%       6.90%
                                               -----        -----       -----
WEIGHTED AVERAGE RATE PAID ON:
  Savings deposits                             2.50%        2.50%       2.75%
  Transaction accounts                         2.64         2.39        3.09
  CDs                                          5.04         5.02        5.39
  Borrowings                                     --         5.50          --
                                               -----        -----       -----
COMBINED WEIGHTED AVERAGE RATE PAID ON
  INTEREST-BEARING LIABILITIES                 4.25%        4.34%       4.77%
                                               -----        -----       -----
SPREAD                                         3.01%        2.77%       2.13%
                                               -----        -----       -----
                                               -----        -----       -----
</TABLE>


     The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities and distinguishes between the increase related to
higher or lower outstanding balances and the volatility of interest rates.  For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume).  For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
presented separately.

<TABLE>
                                                                  Year ended December 31
                                    ----------------------------------------------------------------------------------
                                                  1997 vs 1996                              1996 vs 1995
                                    --------------------------------------   -----------------------------------------
                                          Increase (decrease) due to                 Increase (decrease) due to
                                    --------------------------------------   -----------------------------------------
                                                          Rate/                                      Rate/
                                     Volume      Rate    volume     Total    Volume      Rate       volume     Total
                                    --------   -------   ------    -------   -------   --------     -------   --------
                                                                      (In Thousands)
<S>                                 <C>        <C>       <C>       <C>       <C>       <C>          <C>       <C>
Interest-earning assets:
  Loan portfolio                    $  1,111   $  (73)   $  (25)   $ 1,013   $  320    $  (447)     $  (39)   $  (166)
  Investments                           (199)      32       (22)      (189)    (199)       (39)         15       (223)
  Mortgage-backed securities            (995)     (85)       25     (1,055)    (617)       (11)          2       (626)
  Other interest earning assets            3        5        --          8       68          2           1         71
                                    --------   ------    ------    --------  ------    -------      -------   --------
Total interest-earning assets       $    (80)  $ (121)   $  (22)   $  (223)  $ (428)   $  (495)     $  (21)   $  (944)
                                    --------   ------    ------    --------  ------    -------      -------   --------
                                    --------   ------    ------    --------  ------    -------      -------   --------
Interest-bearing liabilities:
  Savings deposits                  $   (380)  $ (195)   $   19    $  (556)  $ (420)   $  (250)     $   19    $  (651)
  Federal Home Loan Bank advances        (12)       1        (1)       (12)     (52)       (10)          7        (55)
                                    --------   ------    ------    --------  ------    -------      -------   --------
Total interest-bearing liabilities  $   (392)  $ (194)   $   18    $  (568)  $ (472)   $  (260)     $   26    $  (706)
                                    --------   ------    ------    --------  ------    -------      -------   --------
                                    --------   ------    ------    --------  ------    -------      -------   --------
Change in  net interest income      $    312   $   73    $  (40)   $   345   $   44    $  (235)     $  (47)   $  (238)
                                    --------   ------    ------    --------  ------    -------      -------   --------
                                    --------   ------    ------    --------  ------    -------      -------   --------
</TABLE>


                                      41

<PAGE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996.

     Net income for the year ended December 31, 1997 was $1,596,000 or $1.40 per
share compared to net loss of $734,000 or $1.01 per share for 1996.  The 1997
income compared to the loss in 1996 resulted from a reduction in the valuation
allowance of the deferred tax asset of the Company of $1,373,000 in September
1997 (see Note 10 - Income Taxes in Notes to Consolidated Financial Statements).

     NET INTEREST INCOME.  Net interest income before provision for loan losses
is the difference between interest earned on interest-earning assets and
interest paid on interest-bearing liabilities.  Net interest income before
provision for loan losses increased $345,000 to $3,101,000 for 1997 compared to
$2,756,000 in 1996.  The increase in 1997 was due to an effort by management of
the Bank to reduce interest expense for deposits while reducing the level of
mortgage-backed securities and increasing loans in order to enhance interest
income.

     PROVISION FOR LOAN LOSSES.  Management determines the amount of the
allowance for loan loss which covers specific loans as well as estimated losses
inherent in the loan portfolio.  The level of the allowance is based on such
factors as the amount of non-performing assets, historical loss experience,
regulatory policies, general economic conditions, the estimated fair value of
the underlying collateral and other factors which may affect the collectibility
of the loans.  During 1997, the provision for loan losses increased to $118,000
from $14,000 for 1996.  The increase in provision was reflective of the increase
in loans in 1997.

     NONINTEREST INCOME.  Noninterest income was $866,000 in 1997 compared to
$806,000 in 1996.  The increase is due to an increase in fees on deposit
accounts and a $21,000 gain on the sale of available-for-sale mortgage-backed
securities.

     NONINTEREST EXPENSE.  Noninterest expense decreased by $815,000 or 19.04%
to $3,466,000 compared to $4,281,000 in 1996.  Salaries and employee benefits
increased by $171,000 in 1997 due to the opening of a new loan production office
and the formation of the holding company in the last half of 1996.  Deposit
insurance premiums reduced by $886,000 in 1997 due to one-time charge of the
SAIF assessment of $762,000 in 1996.  Professional fees reduced $234,000 due to
a settlement with a former officer of the Bank and a general reduction in fees.

     PROVISION FOR INCOME TAXES.  The net income tax benefit of $1,212,000 in
1997 as compared to no net provision for income taxes in 1996 results primarily
from the 1997 deferred tax asset valuation adjustment of $1,373,000.  Prior to
1997, the deferred tax asset valuation allowance was due primarily to NOL
carryforwards which were not expected to be utilized before their respective
expiration dates or which benefits the Company was unable to predict whether
they would more likely than not be realized.  During 1997, the Company changed
its estimate with respect to the future benefits of the NOL carryforwards and,
accordingly, reduced the related valuation allowance.  To the extent the
valuation allowance was reduced, the related tax benefit was credited to income.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995

     Net loss for the year ended December 31, 1996 was $734,000 (primarily due
to a one time FDIC insurance charge of $762,000, see NONINTEREST EXPENSE) or
$1.03 per share, compared to net income of $414,000 or $.58 per share for 1996.
The 1996 loss as compared to earnings in 1995 resulted from a decrease in net
interest income after provision for loan losses of $267,000 and an increase in
noninterest expense of $852,000.

     NET INTEREST INCOME.  Net interest income before provision for loan losses
is the difference between interest earned on interest-earning assets and
interest paid on interest-bearing liabilities.  Net interest income before
provision for loan losses decreased $238,000 to $2,756,000 for 1996 compared to
$2,994,000 in 1995. The decrease primarily is the result of the early
recognition in interest income of $365,000 in 1995 and the foregone interest
thereon in 1996 resulting from the 1995 pay-off of a previously renegotiated
loan.  These decreases were offset by a 8.5% decrease in average
interest-bearing liabilities.


                                      42

<PAGE>

     PROVISION FOR LOAN LOSSES.  Management determines the amount of the
allowance for loan loss which covers specific loans as well as estimated losses
inherent in the loan portfolio.  The level of the allowance is based on such
factors as the amount of non-performing assets, historical loss experience,
regulatory policies, general economic conditions, the estimated fair value of
the underlying collateral and other factors which may affect the collectibility
of the loans.  During 1996, the provision for loan losses changed to $14,000
from a negative $15,000 for 1995.  The 1996 net provision included an aggregate
negative provision of $65,000 recorded in early 1996 resulting from management's
determination that the previously recorded allowance for loan losses was
excessive at that time given the level of inherent risk in the loan portfolio at
that time.  As the level of lending increased in 1996, an additional provision
of $79,000 was provided.  The increased levels of lending encompassed increases
in commercial real estate lending, permanent single family residential, consumer
and construction lending.  As underlying loan portfolios increased, management
provided increased levels of loan loss allowances to compensate for the
aggregate increase in credit risk.

     NONINTEREST INCOME.  Noninterest income was $806,000 in 1996 compared to
$833,000 in 1995.  The decrease of 3.2% was caused primarily by reduced levels
of loans sold into the secondary market in 1996 which caused decreases in loan
servicing fees.  The decreased levels of servicing fees were partially offset by
an increase in gains on loans held-for-sale as a result of management's efforts
to more selectively sell loans into the secondary market and achieve higher
returns.

     NONINTEREST EXPENSE.  Noninterest expense increased $852,000 or 24.8% to
$4,281,000 in 1996 compared to $3,429,000 in 1995.  Salaries and employee
benefits increased $89,000 primarily as a result of the opening of a loan
production office in Rio Rancho, New Mexico during the third quarter of 1996.
Deposit insurance premiums increased $741,000 due primarily to a one-time charge
for the SAIF assessment of $762,000 accrued for the quarter ending September 30,
1996, which was paid in November 1996.  Other expenses increased $40,000.  The
aforementioned increases were partially offset by a $15,000 decrease in real
estate operations, net, which is reflective of continuing lower levels of
foreclosed real estate.

ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY

     The Bank attempts to maximize net interest income by achieving a positive
interest rate spread that can be sustained during fluctuations in prevailing
interest rates.   Management monitors the mix of earning assets on a continuous
basis in order to react to fluctuating interest rate environments.

     Risk-based capital guidelines and the corresponding asset risk weighting
have resulted in an incentive to invest in mortgage-backed and U.S. Agency
Securities, particularly those issued by government sponsored entities such as
FNMA, GNMA, and FHLMC.  In addition, the favorable risk weighting assigned to
residential loans provided the incentive to invest in these assets.  This asset
mix has always been the basis on which the Bank has focused.

     The Bank assumes a high level of interest rate risk as a result of its
policy to originate fixed-rate single family home loans.  These risks are
minimized by selling mostly thirty year mortgage loans into the secondary
market.  These loans generally have longer terms than the short term
characteristics and liabilities of customer accounts and borrowed money.  During
1996 and 1997 interest rates were stable with a slight decline at the end of
1997.  As the prepayment on loans and mortgage-backed securities have occurred,
the proceeds have been channeled to new loans with a resulting increase in
margin interest income.

     Interest rate sensitivity is the rate at which the Bank's assets and
liabilities are subject to repricing at future time periods.  Management seeks
to effectively manage interest rate sensitivity to insure that net interest
income is maximized while the impact of change on market interest rates is
minimized.  It is the objective of the Bank to reduce the sensitivity of its
earnings to fluctuating interest rates by diversifying the sources of funds,


                                      43

<PAGE>

improving its interest rate spread, and improving the ratio of earning assets
to interest bearing liabilities.  Also, the Bank needs to maintain a match of
maturities and interest rate sensitivity of its assets and liabilities.

     The differences between the volume of assets and liabilities  in the Bank's
current portfolio, which are subject to repricing in future time periods, are
known as interest rate sensitivity gaps.  Certain estimates and assumptions are
included in the data in the table below which sets forth the interest rate
sensitivity analysis at December 31, 1997.

     The following table sets forth the assumed repricing and maturity periods
of the Bank's interest-earning assets and interest-bearing liabilities at
December 31, 1997 and the interest rate sensitivity gap percentages at the dates
indicated.  The interest rate sensitivity gap is defined as the amount by which
assets repricing within the respective periods exceed liabilities repricing
within such periods.  The effect of these assumptions is to quantify the dollar
amount of items that are interest-rate sensitive and can be repriced within each
of the periods specified. Such repricing can occur in one of three ways:  (1)
the rate of interest to be paid on an asset or liability may adjust periodically
on the basis of an index; (2) an asset or liability such as a mortgage loan may
amortize, permitting reinvestment of cash flows at the then-prevailing interest
rates; or (3) an asset or liability may mature, at which time the proceeds can
be reinvested at current market rates.

<TABLE>
                                                                       Maturing or Repricing Amount
                                     --------------------------------------------------------------------------------------------
                                     Within one   Over 1 to 3   Over 3 to 5   Over 5 to 10   Over 10 to    Over 20
                                        year          years         years         years       20 years       years       Total
                                     ----------   -----------   -----------   ------------   ----------    --------    ----------
                                                                             (In Thousands)
<S>                                  <C>           <C>           <C>           <C>           <C>          <C>          <C>
Total Rate Sensitive Assets:
  Mortgages:
    Adjustable-rate (1)              $   10,511    $       --    $       --    $       --    $       --   $       --   $   10,511

    Fixed-rate (2)                        3,869         8,602         6,137         6,914         2,140           44       27,706
    Construction(6)                         354            --            --            --            --           --          354
    Non-residential adjustable (2)        3,517            --            --            --            --           --        3,517
    Non-residential fixed                 1,697           532           616         1,233         1,896           12        5,986
  Non-Mortgages:
    Consumer and Commercial (2)(6)        3,579         6,455         1,352            --            --           --       11,386
  Investments:
    Investment securities (3)             5,152           536             1             1             2            2        5,694
    Mortgage-backed (1)(2)               26,257         5,745         1,971            --            --           --       33,973
    Funds sold (3)                        2,045            --            --            --            --           --        2,045
                                     ----------    ----------    ----------    ----------    ----------   ----------   ----------
TOTAL                                $   56,981    $   21,870    $   10,077    $    8,148    $    4,038   $       58   $  101,172
                                     ----------    ----------    ----------    ----------    ----------   ----------   ----------
                                     ----------    ----------    ----------    ----------    ----------   ----------   ----------
Total Rate Sensitive Liabilities:
  Deposits:
    Certificates of deposit (3)      $   45,004    $    7,674    $    2,659    $       --    $       --   $       --   $   55,337
    IRAs                                  6,923         1,486         1,043            --            --           --        9,452
    Money market (4)                      7,856         7,855            --            --            --           --       15,711
    NOW accounts (4)                      1,352         2,704         1,352         1,351            --           --        6,759
    Savings accounts (4)                    166         3,990         1,386         1,385            --           --        6,927
                                     ----------    ----------    ----------    ----------    ----------   ----------   ----------
TOTAL                                $   61,301    $   23,709    $    6,440    $    2,736    $       --   $       --   $   94,186
                                     ----------    ----------    ----------    ----------    ----------   ----------   ----------
                                     ----------    ----------    ----------    ----------    ----------   ----------   ----------
December 31, 1997
Cumulative interest rate
  sensitivity gap (5)                $   (4,320)   $   (6,159)   $   (2,522)   $    2,890    $    6,928   $    6,986
Cumulative interest rate
  sensitivity gap (5) as a
  percent of total assets                 (4.03)%       (5.75)%       (2.35)%        2.70 %        6.46 %       6.52%
December 31, 1996
Cumulative interest rate
  sensitivity gap (5) as a
  percent of total assets                 (9.30)%       (8.28)%       (4.11)%       (2.99)%        1.40 %       3.05%
December 31, 1995
Cumulative interest rate
  sensitivity gap (5) as a
  percent of total assets                  4.71 %        6.27 %        1.73 %        0.99 %        1.23 %       1.30%
</TABLE>


                                      44

<PAGE>

(1)  MOST ADJUSTABLE RATE ASSETS ARE INCLUDED IN THE "UNDER 1 YEAR" CATEGORY,
     AS THEY ARE SUBJECT TO AN INTEREST RATE ADJUSTMENT EVERY SIX OR TWELVE
     MONTHS, DEPENDING UPON LOAN PLAN.
(2)  MATURITY/RATE SENSITIVITY IS BASED UPON CONTRACTUAL MATURITY WITH
     PROJECTED REPAYMENT OF PRINCIPAL.
(3)  BASED ON CONTRACTUAL MATURITY OF THE INVESTMENTS.
(4)  SAVINGS ACCOUNT DECAY RATES USED ASSUME THAT THE ACCOUNTS HAVE A MARKET
     VALUE SENSITIVITY APPROXIMATING THAT OF A 2 1/2 YEAR TREASURY BOND.
(5)  THE DIFFERENCE BETWEEN RATE SENSITIVE ASSETS AND RATE SENSITIVE
     LIABILITIES.
(6)  GENERALLY FIXED RATE.

     As prepayment activity changes however, the resulting gap is expected to
be affected.  An increase in prepayment speeds would be expected to move the
gap towards a matched or positive position.  The opposite would be expected
to occur if prepayment speeds decrease.  Prepayment speeds are influenced by
fluctuation in interest rates and may not produce the same results as
reflected in the previous table.  Also, certain assets and liabilities may
have similar maturities or repricing periods but could react differently to
changes in interest rates.  Assets which have adjustable-rate features may
have a limitation on the periodic interest rate adjustments and could result
in a rate that is still below existing market rates.  This same feature may
also limit the downward adjustment in a declining rate environment.

     During 1996 and 1995 the Bank sold fixed-rate whole loans
"held-for-sale" while retaining adjustable-rate mortgages.  During 1997, the
Bank began to retain certain fixed-rate loans rather than placing them in the
secondary markets.  The Bank also sold $5,355,647 of securities
available-for-sale in 1997.  Beginning in the third quarter of 1997, FHLB
advances were used to supplement cash flow from operations as the Bank's
lending activities began to increase.

     Presented below, as of December 31, 1997, is an analysis of the Bank's
interest rate risk as measured by changes in net present value for
instantaneous and sustained parallel shifts in the yield curve, in 50 basis
point increments, up and down 200 basis points.  As illustrated in the table,
the Bank's NPV is as sensitive to rising rates as declining rates.  This
occurs principally because, as rates rise, the market value of fixed-rate
loans declines due to both the rate increase and slowing prepayments (and the
NPV focuses on the Bank's entire portfolio, not just assets that are subject
to adjustment or maturity within one year).  When rates decline, the Bank
does not experience a significant rise in market value for these loans
because borrowers repay at relatively high rates.

<TABLE>
                                              Net Present Value
                        Change in           At December 31, 1997
                      interest rate         --------------------
                      (basis points)        $ Change    % Change
                      --------------        --------    --------
<S>                                         <C>         <C>
                                             (000's)

                          +200              $(2,101)       (18)%
                          +150               (1,550)       (13)
                          +100               (1,011)        (9)
                           +50                 (493)        (4)
                             0                   --         --
                           -50                  374          3
                          -100                  605          5
                          -150                  879          7
                          -200                1,120          9
</TABLE>

                                      45
<PAGE>

     Management reviews these measurements periodically.  In addition to
monitoring selected measures on NPV, management also monitors effects on net
interest income resulting from increases or decreases in rates. This measure
is used in conjunction with NPV measures to identify excessive interest rate
risk.

     Certain shortcomings are inherent in the method of analysis presented in
the foregoing table.  For example, although certain assets and liabilities
may have similar maturities or periods to repricing, they may react in
different degrees to changes in market interest rates.  Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market rates.  Additionally, certain assets, such as adjustable
rate mortgage loans, have features which restrict changes in interest rates
on a short-term basis and over the life of the asset.  Further, in the event
of a change in interest rates, prepayment and early withdrawal levels would
likely deviate significantly from those assumed in calculating the table.
Finally, the ability of many borrowers to service their debt may decrease in
the event of an interest rate increase.

     In addition, the previous table does not necessarily indicate the impact
of general interest rate movements on the Bank's net interest income because
the repricing of certain categories of assets and liabilities is subject to
competitive and other pressures beyond the Bank's control.  As a result,
certain assets and liabilities indicated as maturing or otherwise repricing
within a stated period may in fact mature or reprice at different times and
at different volumes.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's current liquidity and capital resources are dependent on
its ability to borrow funds from the Bank and other sources as well as
receive dividends from the Bank.  The Bank's primary sources of funds are
deposits, sales of mortgage loans, principal and interest payments on loans
and mortgage-backed securities, borrowings, and funds provided by operations.
While scheduled loan and mortgage-backed securities principal repayments are
a relatively predictable source of funds, deposits flows, prepayments of
principal on loans and mortgage-backed securities, and sales of mortgage
loans are greatly influenced by general interest rates, economic conditions,
and competition. Current OTS regulations require the Bank to maintain cash
and eligible investments in an amount equal to at least 4% of customer
accounts and short-term borrowings to assure its ability to meet demands for
withdrawals and repayment of short-term borrowings.  As of December 31, 1997,
the Bank's liquidity ratio was 22.37% which was in excess of the minimum
regulatory requirements.

     During the year ended December 31, 1997, total deposits decreased
approximately $752,000 or 0.77%, and FHLB advances decreased by $3,000,000.
The Company sold 461,422 shares of stock resulting in an increase in
stockholders' equity of $2,258,183.

     Securities available-for-sale decreased by $8.6 million and securities
held-to-maturity decreased by $10.2 million in 1997.  The decrease in
securities was due to principal payments, an increase in the level of
principal prepayments, and sale of $5.4 million of securities
available-for-sale.  The decrease in securities was used to fund loans which
increased by $12.6 million and increased cash by $4.6 million in 1997.  The
higher level of cash at December 31, 1997 will be used to  fund loans in the
first quarter of 1998.

     The Bank's capital for regulatory purposes at December 31, 1997 was
$7,966,049 or 7.51% of total regulatory assets.  Regulations require savings
institutions to have a minimum regulatory tangible capital ratio equal to
1.5% of adjustable tangible assets, a minimum 3% core capital ratio, and a
minimum 8% risk-based capital ratio.  At December 31, 1997 and 1996, the Bank
was in compliance with all applicable capital standards.

     Beginning in December 1996, the Company offered to the then existing
stockholders of the Company subscription rights for the issuance of 732,198
shares of the Company's common stock.  The subscription price was $5.25 per
share.  Holders of the subscription rights were able to exercise their
subscription rights until the expiration date on February 14, 1997.  An
aggregate of 286,054 shares of the 732,198 shares of common stock were
subscribed which amounted to $1,501,783.  In addition, the Company issued
174,824 additional shares of stock to other investors at the same
subscription price of $5.25 per share.  When the supplemental offering

                                      46
<PAGE>

expired April 8, 1997, the Company received $917,826 for 174,824 shares.  The
271,320 remaining shares were withdrawn from registration in December 1997.

     The OTS has adopted a rule that requires every thrift association with
more than normal interest rate risk to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to
50% of its interest rate risk exposure multiplied by the present value of its
assets.  This exposure is a measure of the potential decline in the net
portfolio value of a thrift association, greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease
in interest rates (whichever results in a greater decline).  Net portfolio
value is the present value of expected cash flows from assets, liabilities
and off-balance sheet contracts.  The rule provides for a two quarter lag
between calculating interest rate risk and recognizing any deduction from
capital.  Any thrift association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless
the OTS determines otherwise.  Currently, the Bank is exempt from this rule.

     The table below presents the Bank's capital position at December 31,
1997 relative to the existing regulatory requirements:

<TABLE>
                                                              Percent of
                                               Amount         assets (1)
                                           --------------     ----------
                                           (In Thousands)
<S>                                        <C>                <C>
Tangible capital                               $7,966            7.51%
Tangible capital requirement                    1,591            1.50
                                               ------           ------
           Excess tangible capital             $6,375            6.01%
                                               ------           ------
                                               ------           ------
Core capital                                   $7,966            7.51%
Core capital requirement                        3,183            3.00
                                               ------           ------
           Excess core capital                 $4,783            4.51%
                                               ------           ------
                                               ------           ------
Total capital (i.e., core and supplemental
  capital)                                     $8,493           16.81%
Risk-based capital requirement                  4,043            8.00
                                               ------           ------
           Excess total capital                $4,450            8.81%
                                               ------           ------
                                               ------           ------
</TABLE>

(1)  Based upon adjusted assets for purposes of the tangible capital and core
     capital requirements, and risk-weighted assets for purposes of the
     risk-based capital requirement.

     The OTS Capital Distribution Regulation differentiates thrift institutions
primarily by their capital levels and prescribes the amount of capital
distributions that can be made without prior OTS approval.

     The Bank has met its liquidity requirements with funds generated from
operations, proceeds from repayment or sale of loans and investment
securities, and short-term borrowings.  The Bank believes its requirements
for 1998 will be met from similar sources.  If alternative funding is needed,
the Bank can generate additional funds from several other sources.
Currently, the FHLB system functions as a source of credit for the Bank.

ASSET QUALITY

     ALLOWANCE FOR LOAN LOSSES.  The allowance for loan losses is established
through a provision for loan losses based on management's quarterly asset
classification review and evaluation of the risk inherent in its loan portfolio
and changes in the nature and volume of its loan activity.  Such evaluation,
which includes a review of all loans of which full collectibility may not be
reasonably assured, considers among other matters, the estimated fair value of
the underlying collateral, economic conditions, cash flow analysis, historical
loan loss experience,

                                      47
<PAGE>

discussions held with delinquent borrowers and other factors that warrant
recognition in providing for allowance for loan losses.

     During 1997, net loans increased approximately $12,576,000 or 27.6% from
December 31, 1996 and the allowance for loan losses increased $98,000.  With
the decrease in non-performing loans and the low level of charge-offs since
1992, management feels the allowance for loan losses is adequate for future
needs.

     The following presents an analysis of the allowance for loan losses for
years ended December 31, 1997, 1996, and 1995.

<TABLE>
                                             Year ended December 31
                                     -------------------------------------
                                       1997          1996           1995
                                     --------      --------       --------
<S>                                  <C>           <C>            <C>
MORTGAGE LOANS AND CONTRACTS:
Balance at beginning of year         $232,665      $230,865       $230,865

Loans charged-off                      (1,862)           --             --
Recoveries                             20,710         1,800             --
                                     --------      --------       --------

           Net loans recovered         18,848         1,800             --
Provision for loan losses
  charged to operations                49,125            --             --
                                     --------      --------       --------

BALANCE AT END OF YEAR               $300,638      $232,665       $230,865
                                     --------      --------       --------
                                     --------      --------       --------

CONSUMER AND OTHER:
Balance at beginning of year         $196,576      $197,024       $230,058

Loans charged-off                     (59,735)      (17,882)       (20,878)
Recoveries                             21,076         3,795          2,844
                                     --------      --------       --------

           Net loans charged-off      (38,659)      (14,087)       (18,034)
Provision for loan losses
  charged (credited) to operations     68,792        13,639        (15,000)
                                     --------      --------       --------

BALANCE AT END OF YEAR               $226,709      $196,576       $197,024
                                     --------      --------       --------
                                     --------      --------       --------

TOTAL ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of year         $429,241      $427,889       $460,923

Loans charged-off                     (61,597)      (17,882)       (20,878)
Recoveries                             41,786         5,595          2,844
                                     --------      --------       --------

           Net loans charged-off      (19,811)      (12,287)       (18,034)
Provision for loan losses
  charged (credited) to operations    117,917        13,639        (15,000)
                                     --------      --------       --------

BALANCE AT END OF YEAR               $527,347      $429,241       $427,889
                                     --------      --------       --------
                                     --------      --------       --------
Allowance for loan losses as a
  percentage of total loans
  outstanding                           0.90%         0.93%          1.23%
                                     --------      --------       --------
                                     --------      --------       --------
</TABLE>

                                      48
<PAGE>

     NON-PERFORMING ASSETS.  Total non-performing assets decreased by
approximately $1,629,000 during 1997.  The non-performing assets to total assets
ratio is one indicator of the exposure to credit risk.  Non-performing assets of
the Bank consist of non-accruing loans, troubled debt restructurings, and real
estate which was acquired as a result of foreclosure. The composition of the
Bank's portfolio of non-performing assets is shown in the following table:

<TABLE>
                                               1997         1996           1995
                                              -----        ------         ------
                                                        (In Thousands)
<S>                                           <C>          <C>            <C>
Non-accruing loans*                           $   7        $   53         $   --
Past due 90 days or more and still accruing      --            --             --
Renegotiated loans**                             --         1,573          1,573
Other real estate                                76            86            114
                                              -----        ------         ------
Total non-performing assets                   $  83        $1,712         $1,687
                                              -----        ------         ------
                                              -----        ------         ------
Ratio of non-performing assets to
  total assets                                0.08%         1.60%          1.44%
                                              -----        ------         ------
                                              -----        ------         ------
</TABLE>

 *  Primarily loans which are past due for 90 days or more
**  Renegotiated loans are those for which the interest rate was reduced
because of the inability of the borrower to service the obligation under the
original terms of the agreement.

     Interest lost on non-performing assets amounted to $7,337 in 1997
compared to $13,186 in 1996.

     INVESTMENT SECURITIES - The Bank's available-for-sale and
held-to-maturity investment securities portfolios experienced significant
fair market value increases during the year ended December 31, 1997.  This
increase was primarily the result of long-term interest rate decreases in the
market during that period which resulted in higher fair market values
associated with the Bank's investments securities portfolios which contain
fixed rate instruments.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

     The Bank may be a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuation in interest rates.
These financial instruments include commitments to extend credit (including
credit cards), standby letters of credit, and financial guarantees.  These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated statements of
financial position.  The contract or notional amounts of these instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.  The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.

     At December 31, 1997, unfunded credit commitments are as follows:

<TABLE>
<S>                                                        <C>
     Commitments to extend residential loans               $1,057,233
     Lines of credit                                       $1,246,672
     Credit cards                                          $  741,911
</TABLE>

     Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee.  Some of the commitments are
expected to expire without

                                      49
<PAGE>

being drawn upon.  The total commitment amounts do not necessarily represent
future cash requirements.  The Bank evaluates each customer's
creditworthiness on a case-by-case basis.  The amount of collateral obtained,
if deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the customers.

     Standby letters of credit and financial guarantees written are
conditional commitments issued by the Bank to guarantee the performance of a
customer to a third party.  Currently, letters of credit are not extended
beyond one year. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers.  The Bank holds collateral and personal guarantees as deemed
necessary.  At December 31, 1997, the Bank had no standby letters of credit
outstanding.

     At December 31, 1997, the Bank had no open interest rate swaps, futures,
options, or forward contracts.

     At December 31, 1997 and 1996, the Bank had $1,355,106 and $1,170,442,
respectively, of commitments to sell newly-originated single family
residential loans.

INCOME TAXES

     At December 31, 1997, the Company had remaining net operating loss
("NOL") carryforwards of approximately $6,150,000 for federal income tax
purposes which expire in varying amounts through 2010.  The Company also has
a capital loss carryforward of $88,000 for tax purposes which will expire in
1998 and 1999.  In addition, the alternative minimum tax ("AMT") NOL
carryforward and AMT credit carryforward were approximately $6,630,000 and
$101,000, respectively, which expire in varying amounts through 2010.
Investment tax credit carryforwards of approximately $40,000 expire in
varying amounts through 2005.  At December 31, 1997, the Bank had remaining
NOL carryforwards of approximately $40,965,000 for state income tax purposes
which expire in varying amounts through 2005.  These state NOL carryforwards
are substantially more than the federal NOL carryforwards as a result of the
exclusion of U.S. investment security and other income for state income tax
purposes.

Section 382 of the Internal Revenue Code ("Code") provides that the
aforementioned tax NOL carryforwards would be subjected to an annual
limitation should there be a change of over 50% in the stock ownership of the
Company during any three year testing period.  Due to the fact that the
Company has a tax NOL carryforward, it is required to report changes in
ownership of 5% or greater of stockholders annually to the Internal Revenue
Service.  The statute and applicable Treasury regulations are extremely
complex.  The Company believes that no change of ownership as defined in
applicable Section 382 regulations occurred through the three-year testing
period ended December 31, 1997. However, if such a change in ownership
occurs, the annual use of the tax NOL carryforwards would be subject to an
annual limitation.

IMPACT OF INFLATION AND CHANGING PRICES

     The consolidated financial statements and related data have been
prepared in accordance with generally accepted accounting principles which
require measurement of financial position and operating results in terms of
historical dollars, without considering changes in relative purchasing power
over time due to inflation.

     Virtually all of the assets and liabilities of a financial institution
are monetary in nature.  As a result, interest rates generally have a more
significant impact on the Company's  and the Bank's performance than does the
effect of inflation.

IMPACT OF NEW ACCOUNTING STANDARDS

     In June 1996, the FASB issued SFAS No. 125, ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, which was
amended in December 1996. The Statement provides

                                      50
<PAGE>

accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities.  The Company was required to adopt
certain provisions of SFAS No. 125 for the year beginning January 1, 1997 and
certain other provisions of the Statement for the year beginning January 1,
1998.  The adoption of the applicable provision in 1997 did not have a
material impact on the Company's financial position or results of operations.
The adoption of the applicable provisions of this new standard, as amended,
in 1998, is not expected to have a material impact on the Company's and the
Bank's financial position or results of operations.

     In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE.
This Statement establishes standards for computing and presenting earnings
per share ("EPS") and simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, EARNINGS PER SHARE.  SFAS No.
128 supersedes APB Opinion No. 15 and its interpretations and supersedes or
amends other accounting pronouncements related to current computations of
EPS.  The Statement replaced the presentation of primary EPS with a
presentation of basic EPS.  It also requires dual presentation with equal
prominence of basic and diluted EPS for income from continuing operations and
for net income on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.  Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period.  Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.  The
provisions of SFAS No. 128 are effective for financial statements for both
interim and annual periods ending after December 15, 1997, or for the year
ended December 31, 1997, for the Company, with all prior period EPS data
restated to conform with SFAS No. 128.  The adoption of this Statement has
been reflected in this report and, in managements opinion, did not
significantly change the results of previously reported EPS data.

     In February 1997, the FASB issued SFAS No. 129, DISCLOSURE OF
INFORMATION ABOUT CAPITAL STRUCTURE.  This Statement establishes standards
for disclosing information about an entity's capital structure.  This
Statement requires an entity to disclose in its financial statements the
pertinent rights and privileges of the various securities outstanding and the
number of shares upon conversion, exercise, or satisfaction of required
conditions during at least the most recent annual fiscal period and any
subsequent interim period presented. This Statement also requires disclosure
relative to liquidation preference of preferred stock and redeemable stock.
The provisions of SFAS No. 129 are effective for periods ending after
December 15, 1997. The adoption of this Statement, in managements opinion,
did not result in any significant disclosures in addition to those already
contained in the Company's financial statements.

     In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. This Statement establishes standards for reporting and display of
comprehensive income and its components in a full set of financial
statements.  Comprehensive income is the total of reported net income and all
other revenues, expenses, gains and losses that under generally accepted
accounting principles bypass reported net income.  SFAS No. 130 requires that
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements with the aggregate
amount of comprehensive income reported in that same financial statement.
SFAS No. 130 permits the statement of changes in stockholders' equity to be
used to meet this requirement. Companies are encouraged, but not required, to
display the components of other comprehensive income below the total for net
income in the statement of operations or in a separate statement of
comprehensive income.  Companies are also required to display the cumulative
total of other comprehensive income for the period as a separate component of
equity in the statement of financial position.  This Statement is effective
for fiscal years beginning after December 15, 1997, or January 1, 1998, for
the Company, with earlier application permitted.  Companies are also required
to report comparative totals for comprehensive income in interim reports.
Management of the Company will adopt the provisions of this Statement, which
are only of a disclosure nature, effective January 1, 1998.

                                      51
<PAGE>

     In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION.  This Statement supersedes SFAS No.
14, FINANCIAL REPORTING SEGMENTS OF A BUSINESS ENTERPRISE, and utilizes the
"management approach" for segment reporting.  The management approach is
based on the way that the chief operating decision maker organizes segments
within a company for making operating decisions and assessing performance.
Reportable segments are based on any manner in which management disaggregates
its company such as by products and services, geography, legal structure and
management structure.  SFAS No. 131 requires disclosures for each segment
that are similar to those required under current standards with the addition
of quarterly disclosure requirements and more specific and detailed
geographic disclosures especially by countries as opposed to broad geographic
regions.  This Statement also requires descriptive information about the way
the operating segments were determined, the products/services provided by the
operating segments, the differences between the measurements used in
reporting segment information and those used in general purpose financial
statements, and the changes in the measurement of segment amounts from period
to period.  The provisions of SFAS No. 131 are effective for fiscal years
beginning after December 15, 1997, or January 1, 1998, for the Company, with
earlier application permitted.  SFAS No. 131 does not need to be applied to
interim statements in the initial year of application but such comparative
information will be required in interim statements for the second year.
Comparative information for earlier years must be restated in the initial
year of application.  Management of the Company will adopt the provisions of
this Statement, which are only of a disclosure nature, effective January 1,
1998.

IMPACT OF YEAR 2000

     A significant issue has emerged in the banking industry and for the
economy overall regarding how existing application software programs and
operating systems can accommodate the date value for the Year 2000.  The OTS
has taken a strong role to ensure that its associations are prepared for the
impact by requiring reports from its associations and making Year 2000
compliance part of its exam process.

     The Bank completed the awareness and inventory stages of the Year 2000
compliance in 1997.  The Year 2000 Compliance Committee ("Committee") of the
Bank is made up of its management and officers.  The Committee determined
that the assessment and analysis stages would be completed in 1998, and the
conversion implementation, and post implementation stages would be completed
by June 30, 1999.

     The Committee has found some hardware and software applications that are
being updated, but management estimates that the Company will spend less than
$100,000 to remediate its Year 2000 issues, and does not anticipate a
material impact on operations, liquidity and capital resources.  The Company
has Year 2000 statements from all affected vendor relationships at the end of
1997, which the Committee will update and test during 1998 and the first half
of 1999.  The Committee approves all purchases of hardware and software of
over $999 for compliance.

FORWARD-LOOKING INFORMATION

     When used in this report, the words "believes," "anticipates," "expect"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially, including, but not limited to,
those set forth in "Management's Discussion and Analysis or Plan of
Operation."  READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.  THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.

                                      52
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

     Financial statements are filed as a part of this report at the end of
Part III hereof beginning at page F-1, Index to Consolidated Financial
Statements, and are incorporated herein by reference.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

     None

                                    PART III

     The information required by Part III is omitted from this report because
the Company will file a definitive Proxy Statement for the Company's 1998
Annual Meeting of Stockholders (the "Proxy Statement") pursuant to Regulation
14A of the Securities Exchange Act of 1934 not later than 120 days after the
end of the fiscal year covered by this Form 10-KSB and certain information
included therein is incorporated herein by reference.

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The information required by this Item is incorporated by reference to
the Proxy Statement.

ITEM 10. EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to
the Proxy Statement.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to
the Proxy Statement.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to
the Proxy Statement.


                                      53
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

 EXHIBIT NO.                                DESCRIPTION
-------------       ------------------------------------------------------------
      **3.1         Certificate of Amendment of Certificate of Incorporation and
                    Certificate of Incorporation of the Company (incorporated by
                    reference from the Company's Quarterly Report on Form 10-QSB
                    for the quarter ended June 30, 1997, SEC File No. 0-28894)

      **3.2         Amended Bylaws of the Company (incorporated by reference
                    from the Company's Registration Statement on Form S-8, filed
                    June 2,1997, SEC File No. 333-28215)

     **10.1         Agreement and Plan of Reorganization and Plan of Merger
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

 **/***10.2         1986 Stock Option and Incentive Plan (incorporated by
                    reference from the Company's Registration Statement on Form
                    8-A, filed October 11, 1996, SEC File No. 001-12309)

     **10.3         Profit Sharing and Employee Stock Ownership Plan of First
                    Savings Bank, F.S.B. (incorporated by reference from the
                    Company's Registration Statement on Form 8-A, filed October
                    11, 1996, SEC File No. 001-12309)

     **10.3.1       Amendment Number One to Profit Sharing and Employee Stock
                    Ownership Plan of First Savings Bank, F.S.B. (refiled)
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

     **10.4         Agreement for Standby Letter of Credit
                    Advances/Confirmation, Collateral Pledge and Security
                    Agreement with FHLB of Dallas (incorporated by reference
                    from the Company's Registration Statement on Form 8-A, filed
                    October 11, 1996, SEC File No. 001-12309)

 **/***10.6         Employment Agreement with Kenneth J. Huey, Jr. (incorporated
                    by reference from the Company's Registration Statement on
                    Form 8-A, filed October 11, 1996, SEC File No. 001-12309)

  */***10.6.1       Extension of Employment Agreement with Kenneth J. Huey, Jr.
                    dated November 20, 1997

 **/***10.7         Employment Agreement with Norman R. Corzine (incorporated by
                    reference from the Company's 1996 10-KSB)

  */***10.7.1       Extension of Employment Agreement with Norman R. Corzine
                    dated November 20, 1997

     **10.8         Bisys Document Processing, Inc. Item Processing Agreement
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

     **10.8.1       Bisys Document Processing, Inc. Item Processing Agreement
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

     **10.9         Bisys Data Processing Acknowledgment and Assignment
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

 **/***10.10        Non-Employee Director Retainer Plan (incorporated by
                    reference from the Company's Registration Statement on Form
                    S-8, filed June 2, 1997, SEC File No. 333-28217)

 **/***10.11        1997 Stock Option and Incentive Plan (incorporated by
                    reference from the Company's Registration Statement on Form
                    S-8, filed June 2, 1997, SEC File No. 333-28215)

      *21           Subsidiaries of the Small Business Issuer

      *23           Consent of Independent Accountants

      *27.1         Financial Data Schedule

      *27.2         Restated Financial Data Schedule

*    Filed herewith
**   Previously filed
***  Designates each management contract or compensatory plan or arrangement
     required to be identified pursuant to Item 13(a) of Form 10-KSB.

                                      54
<PAGE>

(b)  REPORTS ON FORM 8-K

     The following subparagraph sets forth information concerning one Form
8-K filed during the fourth quarter ended December 31, 1997:

     1.   On November 20, 1997 the Company filed a Form 8-K reporting that the
          Office of Thrift Supervision terminated the Supervisory Agreement
          dated June 17, 1996 and the Amended Prompt Corrective Action Directive
          dated August 2, 1994.













                                      55
<PAGE>

                                     SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       ACCESS ANYTIME BANCORP, INC.

     Date: March 27, 1998              /s/ Norman R. Corzine
                                       -----------------------------------------
                                       Norman R. Corzine, Chairman of the Board,
                                       Chief Executive Officer
                                       (DULY AUTHORIZED REPRESENTATIVE)



     Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By:  /s/ Norman R. Corzine                   By: /s/ R. Chad Lydick
     -----------------------------------        -------------------------------
     Norman R. Corzine                          R. Chad Lydick
     Chairman of the Board                      Director
     Chief Executive Officer
     Director

     Date: March 27, 1998                       Date: March 27, 1998

By:  /s/ Ken Huey, Jr.                       By: /s/ Charles Guthals
     -----------------------------------        -------------------------------
     Ken Huey, Jr.                              Charles Guthals
     President, Chief Financial Officer         Director
     Director

     Date: March 27, 1998                       Date: March 27, 1998

By:  /s/ Carl Deaton                         By: /s/ Allan M. Moorhead
     -----------------------------------        -------------------------------
     Carl Deaton                                Allan M. Moorhead
     Director                                   Director

     Date: March 27, 1998                       Date: March 27, 1998

By:  /s/ James A. Clark                      By: /s/ Thomas W. Martin, III
     -----------------------------------        -------------------------------
     James A. Clark                             Thomas W. Martin, III
     Director                                   Director

     Date: March 27, 1998                       Date: March 27, 1998

                                  (Continued)

                                      56

<PAGE>

                                     SIGNATURES
                                    (CONTINUED)


By:  /s/ Cornelius Higgins, Ph.D.            By: /s/ David Ottensmeyer, M.D.
     -----------------------------------        -------------------------------
     Cornelius Higgins                          David Ottensmeyer
     Director                                   Director

     Date: March 27, 1998                       Date: March 27, 1998


















                                      57

<PAGE>

                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
Report of Independent Accountants                                        F-2

Financial Statements:
     Consolidated Statements of Financial Condition                      F-3
     Consolidated Statements of Operations                               F-4
     Consolidated Statements of Stockholders' Equity                     F-5
     Consolidated Statements of Cash Flows                               F-6
     Notes to Consolidated Financial Statements                          F-8
</TABLE>

















                                     F-1

<PAGE>

                         REPORT OF INDEPENDENT ACCOUNTANTS



Board of Directors and Stockholders
Access Anytime Bancorp, Inc.
Clovis, New Mexico


We have audited the accompanying consolidated statements of financial condition
of Access Anytime Bancorp, Inc. and subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Access Anytime
Bancorp, Inc. and subsidiary as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for earnings per share in 1997 and changed its
method of accounting for loan servicing rights during 1995.




Robinson Burdette Martin & Cowan, L.L.P.

Lubbock, Texas
February 10, 1998






                                     F-2

<PAGE>

                 ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
                                                           December 31
                                                   ---------------------------
ASSETS                                                 1997           1996
------                                             ------------   ------------
<S>                                                <C>            <C>
Cash and cash equivalents                          $  6,814,126   $  2,199,227
Certificates of deposit                               1,530,000        380,570
Securities available-for-sale (amortized
   cost of $15,036,150 and $23,838,281)              15,032,085     23,639,686
Securities held-to-maturity (aggregate fair
   value of $18,803,081 and $28,470,335)             18,947,399     29,113,430
Loans held-for-sale (aggregate fair value of
   $304,150 and $576,994)                               297,873        564,361
Loans receivable                                     58,172,494     45,596,212
Interest receivable                                     585,730        598,327
Real estate owned                                        76,091         86,114
FHLB stock                                            1,667,434      1,572,334
Premises and equipment                                2,054,247      1,924,405
Servicing rights                                        331,296        345,554
Organizational cost, net of accumulated
   amortization of $48,055 and $9,814                   157,039        163,373
Deferred tax asset                                    1,402,032        188,650
Other assets                                            145,372        481,114
                                                   ------------   ------------
      Total assets                                 $107,213,218   $106,853,357
                                                   ------------   ------------
                                                   ------------   ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Deposits                                        $ 97,412,005   $ 98,164,001
   Federal Home Loan Bank advances                           --      3,000,000
   Accrued interest and other liabilities               358,154        351,135
   Advanced payments by borrowers for
      taxes and insurance                               297,837        252,099
                                                   ------------   ------------
      Total liabilities                              98,067,996    101,767,235
                                                   ------------   ------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.01 par value;
     4,000,000 shares authorized; none issued                --             --
   Common stock, $.01 par value; 6,000,000
     shares authorized; 1,217,336 and 732,198
     shares issued and outstanding in 1997
     and 1996, respectively                              12,173          7,322
   Capital in excess of par value                     9,477,405      7,019,577
   Accumulated deficit                                 (341,673)    (1,742,182)
   Net unrealized depreciation on
      available-for-sale securities, net of tax
      of $1,382 in 1997 and $0 in 1996                   (2,683)      (198,595)
                                                   ------------   ------------
      Total stockholders' equity                      9,145,222      5,086,122
                                                   ------------   ------------
      Total liabilities and stockholders' equity   $107,213,218   $106,853,357
                                                   ------------   ------------
                                                   ------------   ------------
</TABLE>

            The accompanying notes are an integral part of these
                      consolidated financial statements.

                                      F-3

<PAGE>


                 ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
                                                Years ended December 31
                                        -------------------------------------
                                           1997         1996          1995
                                        ----------   ----------    ----------
<S>                                     <C>          <C>           <C>
Interest income:
   Loans receivable                     $4,490,079   $3,476,520    $3,642,581
   U.S. government agency securities       103,888      292,926       515,950
   Mortgage-backed securities            2,379,293    3,434,232     4,060,235
   Other interest income                   277,041      268,950       197,783
                                        ----------   ----------    ----------
        Total interest income            7,250,301    7,472,628     8,416,549
                                        ----------   ----------    ----------
Interest expense:
   Deposits                              4,136,200    4,692,438     5,342,347
   FHLB advances                            13,007       24,663        80,248
                                        ----------   ----------    ----------
        Total interest expense           4,149,207    4,717,101     5,422,595
                                        ----------   ----------    ----------

Net interest income before provision
   for loan losses                       3,101,094    2,755,527     2,993,954
Provision for loan losses charged
   (credited)                              117,917       13,639       (15,000)
                                        ----------   ----------    ----------
        Net interest income after
          provision for loan losses      2,983,177    2,741,888     3,008,954
                                        ----------   ----------    ----------

Noninterest income:
   Loan servicing and other fees           329,420      339,058       371,843
   Net realized gains on sales
     of available-for-sale securities       20,637           --            --
   Net realized gains on sales of loans    148,915      141,175       117,840
   Other income                            367,338      325,378       343,705
                                        ----------   ----------    ----------
        Total other income                 866,310      805,611       833,388
                                        ----------   ----------    ----------

Noninterest expenses:
   Salaries and employee benefits        1,777,190    1,606,397     1,517,416
   Occupancy expense                       401,755      371,413       367,023
   Deposit insurance premium               258,375    1,144,417       403,218
   Advertising                              53,465       28,347        27,348
   Real estate operations, net               3,013       42,826        57,880
   Professional fees                        16,611      250,673       258,961
   Other expense                           955,369      836,996       796,874
                                        ----------   ----------    ----------
        Total other expenses             3,465,778    4,281,069     3,428,720
                                        ----------   ----------    ----------
Income (loss) before income taxes          383,709     (733,570)      413,622

Income tax benefit                       1,212,000           --            --
                                        ----------   ----------    ----------
Net income (loss)                       $1,595,709   $ (733,570)   $  413,622
                                        ----------   ----------    ----------
                                        ----------   ----------    ----------
Earnings (loss) per common share        $     1.40   $    (1.01)   $     0.58
                                        ----------   ----------    ----------
                                        ----------   ----------    ----------
Earnings (loss) per common
   share-assuming dilution              $     1.37   $    (1.01)   $     0.58
                                        ----------   ----------    ----------
                                        ----------   ----------    ----------
</TABLE>

                  The accompanying notes are an integral part of
                     these consolidated financial statements.

                                      F-4
<PAGE>

                    ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                  Net Unrealized
                                               Common Stock                                        Depreciation
                                         ----------------------   Capital In                      On Available-
                                          Number Of                Excess Of     Accumulated         For-Sale
                                            Shares      Amount     Par Value        Deficit       Securities, Net     Total
                                         ---------    ---------  ------------    ------------    ---------------   -----------
<S>                                      <C>          <C>        <C>             <C>             <C>               <C>
Balance at December 31, 1994               695,698    $  6,957   $  6,826,442    $ (1,422,234)    $  (363,403)     $ 5,047,762

Net income                                      --          --             --         413,622              --          413,622

Net changes in unrealized depreciation
  on available-for-sale securities, net         --          --             --              --         158,993          158,993
                                         ---------    --------   ------------    ------------     -----------      -----------
Balance at December 31, 1995               695,698       6,957      6,826,442      (1,008,612)       (204,410)       5,620,377

Net loss                                        --          --             --        (733,570)             --         (733,570)

Common stock issued                         36,500         365        193,135              --              --          193,500

Net changes in unrealized depreciation
  on available-for-sale securities, net         --          --             --              --           5,815            5,815
                                         ---------    --------   ------------    ------------     -----------      -----------
Balance at December 31, 1996               732,198       7,322      7,019,577      (1,742,182)       (198,595)       5,086,122

Net income                                      --          --             --       1,595,709              --        1,595,709

Common stock issued                        461,422       4,614      2,253,569              --              --        2,258,183

Common stock rights issued in lieu
  of directors cash compensation                --          --         10,500              --              --           10,500

2% common stock dividend issued on
  December 1, 1997                          23,716         237        193,759        (193,996)             --               --

Cash dividends-fractional shares in cash        --          --             --          (1,204)             --           (1,204)

Net changes in unrealized depreciation
  on available-for-sale securities, net         --          --             --              --         195,912          195,912
                                         ---------    --------   ------------    ------------     -----------      -----------
Balance at December 31, 1997             1,217,336    $ 12,173   $  9,477,405    $   (341,673)    $    (2,683)     $ 9,145,222
                                         ---------    --------   ------------    ------------     -----------      -----------
                                         ---------    --------   ------------    ------------     -----------      -----------

                   The accompanying notes are an integral part of these consolidated financial statements.

                                                                    F-5
</TABLE>
<PAGE>

                    ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
                                                                   Years ended December 31
                                                       --------------------------------------------
                                                            1997            1996            1995
                                                       ------------    ------------     -----------
<S>                                                    <C>             <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                   $  1,595,709    $   (733,570)    $   413,622
   Adjustments to reconcile net income (loss)
    to cash provided (used) by operating
    activities:
      Depreciation                                          144,419         133,970         132,527
      Deferred income taxes                              (1,212,000)             --              --
      Provision for loan losses charged (credited)          117,917          13,639         (15,000)
      Amortization of premiums on investment securities     308,294         300,594         207,830
      Amortization of loan premiums, discounts and
         deferred fees, net                                 134,689          (6,148)       (520,723)
      Amortization of organizational costs                   38,241           9,814              --
      Gain on sale of available-for-sale securities         (20,637)             --              --
      Gain on sale of loans held-for-sale                  (148,915)       (176,011)       (105,321)
      Proceeds from sales of loans held-for-sale          8,769,996       9,058,465       7,625,886
      Originations of loans held-for-sale                (8,347,287)     (8,620,197)     (7,698,757)
      Common stock rights issued in lieu of
         directors compensation                              10,500              --              --
      (Gain) loss on foreclosed real estate                    (813)            512           1,670
      (Gain) loss on disposition of assets                      727          16,112          (3,095)
      Net (increase) decrease in accrued interest
         receivable and other assets                        162,186        (105,052)         12,188
      Increase (decrease) in accrued expense and
         other liabilities                                    7,019         (50,506)        140,723
                                                       ------------    ------------     -----------
         Net cash provided by (used in) operating
           activities                                     1,560,045        (158,378)        191,550
                                                       ------------    ------------     -----------
Cash flows from investing activities:
   Proceeds from maturities and principal
      repayments of available-for-sale securities         3,250,346       9,319,271       2,061,754
   Purchases of held-to-maturity securities                      --      (5,017,969)       (750,000)
   Proceeds from maturities and principal repayments
      of held-to-maturity securities                     10,055,258      12,145,023       9,630,086
   Proceeds from sales of available-for-sale-securities   5,376,284              --              --
   Net (increase) decrease in certificates of deposit    (1,149,430)         95,855         (87,832)
   Net (increase) decrease in loans                     (12,836,195)    (11,302,134)      2,037,984
   Proceeds from sales of foreclosed real estate             19,600          57,613         140,882
   Purchases of premises and equipment                     (274,988)        (89,627)        (64,711)
                                                       ------------    ------------     -----------
         Net cash provided by investing activities        4,440,875       5,208,032      12,968,163
                                                       ------------    ------------     -----------
Cash flows from financing activities:
   Net decrease in deposits                                (751,996)    (12,469,123)     (2,139,405)
   Net change in other borrowed funds                    (3,000,000)      3,000,000      (7,400,000)
   Net increase (decrease) in advance payments by
      borrowers for taxes and insurance                      45,738         (59,058)         83,324
   Organizational costs incurred                            (31,907)       (173,187)             --
   Rights offering costs incurred                           (69,253)        (95,165)             --
   Proceeds from issuance of common stock                 2,422,601         193,500              --
   Cash dividend (fractional share payments)                 (1,204)             --              --
                                                       ------------    ------------     -----------
         Net cash used in financing activities           (1,386,021)     (9,603,033)     (9,456,081)
                                                       ------------    ------------     -----------
Increase (decrease) in cash and cash equivalents          4,614,899      (4,553,379)      3,703,632
Cash and cash equivalents at January 1                    2,199,227       6,752,606       3,048,974
                                                       ------------    ------------     -----------
Cash and cash equivalents at December 31               $  6,814,126    $  2,199,227     $ 6,752,606
                                                       ------------    ------------     -----------
                                                       ------------    ------------     -----------

                                     (Continued)

                                         F-6

<PAGE>

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                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (CONTINUED)

<CAPTION>
                                                                   Years ended December 31
                                                       --------------------------------------------
                                                            1997            1996            1995
                                                       ------------    ------------     -----------
<S>                                                    <C>             <C>              <C>
Supplemental disclosures of cash flow information:
   Cash paid during the year for:
   Interest                                            $  4,147,090    $  4,827,856     $ 5,312,477
   Income taxes                                                  --              --              --
   Supplemental disclosure of non-cash investing
     and financing activities
       Real estate acquired in settlement of loans           20,862          53,419         104,509
       Common stock dividend                                193,996              --              --
       Loans to facilitate the sale of real estate owned         --          23,000         269,150
</TABLE>


                             The accompanying notes are an integral part of
                                these consolidated financial statements.

                                                  F-7

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)

NOTE 1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES - Access
Anytime Bancorp, Inc. (the "Company") is a thrift holding company for its
wholly-owned subsidiary First Savings Bank, F.S.B. renamed FirstBank (the
"Bank") and the Bank's wholly-owned subsidiary, First Equity Development
Corporation ("FEDCO"). The consolidated financial statements include the
accounts and transactions of the Company, the Bank and FEDCO. All significant
intercompany accounts and transactions have been eliminated in consolidation.

The Company was formed in 1996 and, through an agreement and plan of
reorganization by and between the Company and the Bank, became the holding
company for the Bank under a stock-for-stock exchange.  As a result of this
reorganization, the 1995 financial statements are presented to reflect the
result of the reorganization. There was no effect on that year's net income or
net income per share of common stock.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash, due from
banks and all certificates of deposit with original maturities of three months
or less.  There are no amounts subject to withdrawal or usage restrictions.

SECURITIES AVAILABLE-FOR-SALE - Securities to be held for indefinite periods
of time and not intended to be held-to-maturity are classified as
available-for-sale.  Assets included in this category are those assets that
management intends to use as part of its asset/liability management strategy
and that may be sold in response to changes in liquidity needs, interest
rates, resultant prepayment risk, and other factors related to interest rate
and resultant prepayment risk changes.  Securities available-for-sale are
recorded at fair value.  Both unrealized gains and losses on securities
available-for-sale, net of taxes, are included as a separate component of
stockholders' equity in the consolidated statements of financial condition
until these gains or losses are realized. Gain and losses are determined
using the specific-identification method.  If a security has a decline in
fair value that is other than temporary, the security is written down to its
fair value by recording a loss in the consolidated statements of operations.


                                 (Continued)

                                     F-8

<PAGE>

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                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)

NOTE 1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

SECURITIES HELD-TO-MATURITY - Securities for which the Bank has the positive
intent and ability to hold to maturity are reported at cost, adjusted for
premiums and discounts that are recognized in interest income using the interest
method over period to maturity.  If a security has a decline in fair value below
its amortized cost that is other than temporary, the security is written down to
its new cost basis by recording a loss in the consolidated statements of
operations.  The Bank has not experienced a permanent decline on securities that
would result in a charge to operations.

LOANS HELD-FOR-SALE - Loans to be held for indefinite periods of time and not
intended to be held-to-maturity are classified as held-for-sale.  Loans
held-for-sale are recorded at the lower of amortized cost or fair value with
only net unrealized losses included in the consolidated statements of
operations.

FEDERAL HOME LOAN BANK (FHLB) STOCK - This asset is owned due to regulatory
requirements and is carried at cost.  This stock is pledged as collateral to
secure FHLB advances.

LOANS RECEIVABLE - Loans receivable that management has the intent and ability
to hold for the foreseeable future or until maturity or pay-off are reported at
their outstanding principal adjusted for any unearned discount, the allowance
for loan losses and any deferred fees or costs on originated loans.

Unearned discount on installment loans is recognized as income over terms which
approximate the interest method.  Interest on other loans is recognized using
the simple-interest method on the daily balances of the principal amounts
outstanding.

The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due.  When
interest accrual is discontinued, all unpaid accrued interest is reversed.  If
the ultimate collectibility of principal, wholly or partially, is in doubt, any
payment received on a loan on which the accrual of interest has been suspended
is applied to reduce principal to the extent necessary to eliminate such doubt.
Otherwise, interest income is recognized for such payments.

Loan origination fees and direct origination costs are deferred and recognized
as an adjustment of the yield of the related loan.

The Bank defines a loan as impaired when, based on current information and
events, it is probable that the Bank will be unable to collect all amounts due
according to the contractual terms of the loan agreement.  The Bank uses the
same criteria in placing a loan on nonaccrual status, exclusive of residential
mortgage loans and consumer loans which are placed on nonaccrual status when
they become 90 days past due.  When interest accrual is discontinued, all unpaid
accrued interest is reversed.  Interest income is subsequently recognized only
to the extent cash payments are received.


                                 (Continued)

                                     F-9

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)


NOTE 1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

The allowance for loan losses is increased by charges to income and decreased
by revisions in the estimate of the necessary allowance and by charge-offs
(net of recoveries). Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.

LOAN SERVICING - The cost of mortgage servicing rights is amortized in
proportion to, and over the period of, estimated net servicing revenues.
Impairment of mortgage servicing rights is assessed based on the fair value
of those rights.  Fair values are estimated using discounted cash flows based
on a current market interest rate.  For purposes of measuring impairment, the
rights are stratified based on the predominant risk characteristics of the
underlying loans.  The amount of impairment recognized is the amount by which
the capitalized mortgage servicing rights for a stratum exceed their fair
value.

When participating interests in loans sold have an average contractual interest
rate, adjusted for normal servicing fees, that differs from the agreed yield to
the purchaser, gains or losses are recognized equal to the present value of such
differential over the estimated remaining life of such loans.  The resulting
"excess servicing receivable" or "deferred servicing revenue" is amortized over
the estimated life using a method approximating the interest method.

Quoted market prices are not available for the excess servicing receivables.
Thus, the excess servicing receivables and the amortization thereon are
periodically evaluated in relation to estimated future servicing revenues,
taking into consideration changes in interest rates, current prepayment rates,
and expected future cash flows.  The bank evaluates the carrying value of the
excess servicing receivables by estimating the future servicing income of the
excess servicing receivables based on management's best estimate of remaining
loan lives and discounted at the original discount rate.

Effective July 1, 1995, the Bank adopted Statement of Financial Accounting
Standards ("SFAS") No. 122, ACCOUNTING FOR MORTGAGE SERVICING RIGHTS, AN
AMENDMENT OF SFAS NO. 65.  SFAS NO. 122 eliminated the accounting distinction
between rights to service mortgage loans for others that are acquired through
loan origination activities and those acquired through purchase transactions.
The effect of adopting this new accounting standard was to increase 1995 net
income by $11,338.

For originated mortgage servicing rights, the Bank allocates the total cost of
the mortgage loans to the mortgage servicing rights and the loans (without the
mortgage servicing rights) based on their relative fair values.  Fair values are
based on quoted market prices in active markets for loans and loan servicing
rights.  For purchased mortgage servicing rights, the cost of acquiring loan
servicing contracts is capitalized to the extent such costs do not exceed the
amount by which the present value of estimated future servicing revenue exceeds
the present value of expected future servicing costs.


                                 (Continued)

                                    F-10

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)


NOTE 1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

PREMISES AND EQUIPMENT - Land is carried at cost.  Premises and equipment are
carried at cost, less accumulated depreciation computed by the straight-line
method over the estimated useful life of the assets.  Maintenance and repairs
are charged to expense as incurred and improvements are capitalized.

The Company adopted SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS TO BE DISPOSED OF during 1996.  The Statement establishes accounting
standards for determining the impairment of the Company's long-lived assets.
Implementation of the Statement did not result in any adjustments to the
carrying values of the Company's assets.

FORECLOSED REAL ESTATE - Real estate properties acquired through foreclosure, or
in lieu of foreclosure are to be sold and are initially recorded at fair value
at the date of foreclosure establishing a new cost basis.  Any excess of the
loan balance and foreclosure costs over the fair value at the date of
foreclosure is charged to the allowance for loan losses.  After foreclosure,
valuations are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost to sell.
Revenue and expenses from operations and changes in the valuation allowance are
included in loss on foreclosed real estate.

ORGANIZATIONAL COSTS - Organizational costs are being amortized using the
straight-line method over five years.

STOCK-BASED COMPENSATION - The Company applies Accounting Principles Board
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" ("APB 25") and
related interpretations in accounting for its stock-based compensation plans.

In 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION" which was effective for fiscal years
beginning after December 15, 1995.  Under SFAS No. 123, the Company may elect to
recognize stock-based compensation expense based on the fair value of the awards
or continue to account for stock-based compensation under APB 25.  The Company
has elected to continue to apply the provisions of APB 25.

INCOME TAXES - The Company utilizes the liability method of accounting for
income taxes, whereby deferred income taxes are recognized for the tax
consequences in future years of differences in the tax bases of assets and
liabilities and their financial reporting amounts based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income.  Valuation allowances are established, if
necessary, to reduce deferred tax assets to the amount expected to be realized.

NET INCOME (LOSS) PER SHARE - In February 1997, the FASB issued SFAS No. 128,
EARNINGS PER SHARE.  This Statement requires dual presentation of basic and
diluted earnings per share and a reconciliation of both the numerator and
denominator used in the two calculations.  The Company has implemented this new
standard for the year ended December 31, 1997 and net income (loss) per share
for 1996 and 1995 have been restated to


                                 (Continued)

                                    F-11

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)


NOTE 1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

comply with this standard.  Basic earnings per share has been computed on the
basis of the weighted-average number of shares of common stock outstanding
during the period.  Diluted earnings per share reflects the potential dilution
that would have occurred if stock options and other contingently issuable shares
of common stock had been issued during the period.

IMPACT OF NEW ACCOUNTING STANDARDS - In June 1996, the FASB issued SFAS No. 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES, which was amended in December 1996.  The Statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities.  The Company was required to adopt
certain provisions of SFAS No. 125 for the year beginning January 1, 1997 and
certain other provisions of the Statement for the year beginning January 1,
1998.  The adoption of the applicable provision in 1997 did not have a material
impact on the Company's financial position or results of operations.  The
adoption of the applicable provisions of this new standard, as amended, in 1998,
is not expected to have a material impact on the Company's financial position or
results of operations.

In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE.  This
Statement establishes standards for computing and presenting earnings per share
("EPS") and simplifies the standards for computing earnings per share previously
found in Accounting Principles Board ("APB") Opinion No. 15, EARNINGS PER SHARE.
SFAS No. 128 supersedes APB Opinion No. 15 and its interpretations and
supersedes or amends other accounting pronouncements related to current
computations of EPS.  The Statement replaced the presentation of primary EPS
with a presentation of basic EPS.  It also requires dual presentation with equal
prominence of basic and diluted EPS for income from continuing operations and
for net income on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.  Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.  The provisions of
SFAS No. 128 are effective for financial statements for both interim and annual
periods ending after December 15, 1997, or for the year ended December 31, 1997,
for the Company, with all prior period EPS data restated to conform with SFAS
No. 128.  The adoption of this Statement has been reflected in this report and,
in managements opinion, did not significantly change the results of previously
reported EPS data.

In February 1997, the FASB issued SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT
CAPITAL STRUCTURE.  This Statement establishes standards for disclosing
information about an entity's capital structure.  This Statement requires an
entity to disclose in its financial statements the pertinent rights and
privileges of the various securities outstanding and the number of shares upon
conversion, exercise, or satisfaction of required conditions during at least the
most recent annual fiscal period and any subsequent interim period presented.
This Statement also requires disclosure relative to liquidation preference of
preferred stock and redeemable stock.  The provisions of SFAS No. 129 are
effective for periods ending after December 15, 1997. The adoption of this
Statement, in managements opinion, did not result in any significant disclosures
in addition to those already contained in the Company's financial statements.


                                 (Continued)

                                    F-12

<PAGE>

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                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)


NOTE 1    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED)

In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME.
This Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.  Comprehensive
income is the total of reported net income and all other revenues, expenses,
gains and losses that under generally accepted accounting principles bypass
reported net income.  SFAS No. 130 requires that comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements with the aggregate amount of comprehensive income
reported in that same financial statement.  SFAS No. 130 permits the statement
of changes in stockholders' equity to be used to meet this requirement.
Companies are encouraged, but not required, to display the components of other
comprehensive income below the total for net income in the statement of
operations or in a separate statement of comprehensive income.  Companies are
also required to display the cumulative total of other comprehensive income for
the period as a separate component of equity in the statement of financial
position.  This Statement is effective for fiscal years beginning after December
15, 1997, or January 1, 1998, for the Company, with earlier application
permitted.  Companies are also required to report comparative totals for
comprehensive income in interim reports.  Management of the Company will adopt
the provisions of this Statement, which are only of a disclosure nature,
effective January 1, 1998.

In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION.  This Statement supersedes SFAS No. 14,
FINANCIAL REPORTING SEGMENTS OF A BUSINESS ENTERPRISE, and utilizes the
"management approach" for segment reporting.  The management approach is based
on the way that the chief operating decision maker organizes segments within a
company for making operating decisions and assessing performance.  Reportable
segments are based on any manner in which management disaggregates its company
such as by products and services, geography, legal structure and management
structure.  SFAS No. 131 requires disclosures for each segment that are similar
to those required under current standards with the addition of quarterly
disclosure requirements and more specific and detailed geographic disclosures
especially by countries as opposed to broad geographic regions.  This Statement
also requires descriptive information about the way the operating segments were
determined, the products/services provided by the operating segments, the
differences between the measurements used in reporting segment information and
those used in general purpose financial statements, and the changes in the
measurement of segment amounts from period to period.  The provisions of SFAS
No. 131 are effective for fiscal years beginning after December 15, 1997, or
January 1, 1998, for the Company, with earlier application permitted.  SFAS No.
131 does not need to be applied to interim statements in the initial year of
application but such comparative information will be required in interim
statements for the second year.  Comparative information for earlier years must
be restated in the initial year of application.  Management of the Company will
adopt the provisions of this Statement, which are only of a disclosure nature,
effective January 1, 1998.

RECLASSIFICATIONS - Certain amounts for prior years have been reclassified to
conform with the current year presentation.  These reclassifications had no
effect on net income (loss) or stockholders' equity.


                                 (Continued)

                                    F-13

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)



NOTE 2    SECURITIES

Securities have been classified in the consolidated statements of financial
condition according to management's intent.  The carrying amount of securities
and their approximate fair value at December 31 follow:

<TABLE>
<CAPTION>
                                          Amortized           Gross unrealized          Fair
                                             Cost            Gains        Losses        Value
                                         ------------      ---------    ----------    ------------
<S>                                      <C>               <C>          <C>           <C>
AVAILABLE-FOR-SALE SECURITIES:
  December 31, 1997:
    Mortgage-backed securities:
      GNMA adjustable rate               $ 15,036,150      $  69,199    $   73,264    $ 15,032,085
                                         ------------      ---------    ----------    ------------
                                         $ 15,036,150      $  69,199    $   73,264    $ 15,032,085
                                         ------------      ---------    ----------    ------------
                                         ------------      ---------    ----------    ------------
  December 31, 1996:
    Mortgage-backed securities:
      GNMA adjustable rate               $ 23,838,281      $  18,365    $  216,960    $ 23,639,686
                                         ------------      ---------    ----------    ------------
                                         $ 23,838,281      $  18,365    $  216,960    $ 23,639,686
                                         ------------      ---------    ----------    ------------
                                         ------------      ---------    ----------    ------------

<CAPTION>
                                          Amortized           Gross unrealized          Fair
                                             Cost            Gains        Losses        Value
                                         ------------      ---------    ----------    ------------
<S>                                      <C>               <C>          <C>           <C>
HELD-TO-MATURITY SECURITIES:

  December 31, 1997:
    Mortgage-backed securities:
      FNMA participation certificates    $  4,362,078      $      --    $   55,795    $  4,306,283
      FHLMC participation certificates     12,942,259          6,127        66,551      12,881,835
      FHLMC adjustable rate                 1,643,062             --        28,099       1,614,963
                                         ------------      ---------    ----------    ------------
                                         $ 18,947,399      $   6,127    $  150,445    $ 18,803,081
                                         ------------      ---------    ----------    ------------
                                         ------------      ---------    ----------    ------------
  December 31, 1996:
    Mortgage-backed securities:
      FNMA participation certificates    $  5,355,122      $      --    $  162,192    $  5,192,930
      FHLMC participation certificates     21,896,565          4,818       453,206      21,448,177
      FHLMC adjustable rate                 1,861,743             --        32,515       1,829,228
                                         ------------      ---------    ----------    ------------
                                         $ 29,113,430      $   4,818    $  647,913    $ 28,470,335
                                         ------------      ---------    ----------    ------------
                                         ------------      ---------    ----------    ------------
</TABLE>

                                 (Continued)

                                    F-14

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Continued)




NOTE 2    SECURITIES  (CONTINUED)

Due to the uncertainty of the future utilization of unrealized losses, should
they be realized, the income tax benefit has been offset by a valuation
allowance against the resulting deferred tax asset at December 31, 1996.

The scheduled maturities of securities available-for-sale and held-to-maturity
at December 31, 1997 were as follows:

<TABLE>
                             Available-for-sale securities:    Held-to-maturity securities:
                             ------------------------------    ----------------------------
                              Amortized           Fair           Amortized        Fair
                                 Cost             Value            Cost           Value
                             ------------     -------------    -------------   ------------
<S>                          <C>              <C>              <C>             <C>
Due in one year or less      $         --     $          --    $  8,248,240    $  8,215,006
Due from one to five years             --                --       9,056,097       8,973,112
Due from five to ten years             --                --              --              --
Due after ten years            15,036,150        15,032,085       1,643,062       1,614,963
                             ------------     -------------    -------------   ------------
                             $ 15,036,150     $  15,032,085    $ 18,947,399    $ 18,803,081
                             ------------     -------------    -------------   ------------
                             ------------     -------------    -------------   ------------
</TABLE>

For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings based
on the weighted-average contractual maturities of underlying collateral.  The
mortgage-backed securities may mature earlier than their weighted-average
contractual maturities because of principal prepayments.

Securities of $2,800,534 and $8,047,826 were pledged to secure public deposits
and for other purposes required as permitted by law at December 31, 1997 and
1996, respectively.


NOTE 3    LOANS HELD-FOR-SALE

The carrying amount of loans held-for-sale and their estimated fair value, as
determined on an aggregate basis, at December 31, follows:

<TABLE>
                                     Gross unrealized
                                    ------------------
     December 31   Amortized cost     Gains     Losses    Fair value
     -----------   --------------   --------    ------    ----------
     <S>           <C>              <C>         <C>       <C>
        1997         $  297,873     $  6,277    $   --    $  304,150
        1996            564,361       12,633        --       576,994
</TABLE>

Proceeds from sale of loans held-for-sale were $8,769,997, $9,058,465, and
$7,625,886 for the years ended December 31, 1997, 1996 and 1995, respectively.
Gains of $149,742 and losses of $827 were recognized in 1997, while gains of
$176,411 and losses of $400 were recognized in 1996, and gains of $105,507 and
losses of $186 were recognized in 1995.

                                 (Continued)

                                    F-15

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 4    LOANS RECEIVABLE

The components of loans in the consolidated statements of financial condition
were as follows:

<TABLE>
                                               December 31
                                       --------------------------
                                            1997         1996
                                       ------------  ------------
<S>                                    <C>           <C>
First mortgage loans:
  Conventional                         $ 41,730,469  $ 31,513,687
  FHA insured and VA guaranteed           4,531,977     4,326,093
Consumer and installment loans           11,336,782     9,047,776
Consumer timeshare loans                     40,250       179,494
Construction loans                          889,400     1,975,000
Other                                     1,167,782       387,600
                                       ------------  ------------
                                         59,696,660    47,429,650

Less:
  Loans in process                          535,054     1,077,121
  Unearned discounts, deferred loan
   fees, and other                          461,765       327,076
  Allowance for loan losses                 527,347       429,241
                                       ------------  ------------
                                       $ 58,172,494  $ 45,596,212
                                       ------------  ------------
                                       ------------  ------------
</TABLE>

An analysis of the changes in allowance for loan losses follows:

<TABLE>
                                           Years ended December 31
                                  ----------------------------------------
                                     1997           1996           1995
                                  ----------     ----------     ----------
<S>                               <C>            <C>            <C>
Balance at beginning of year      $  429,241     $  427,889     $  460,923

Loans charged-off                    (61,597)       (17,882)       (20,878)
Recoveries                            41,786          5,595          2,844
                                  ----------     ----------     ----------
      Net loans charged-off          (19,811)       (12,287)       (18,034)
Provision for loan losses
 charged (credited) to
 operations                          117,917         13,639        (15,000)
                                  ----------     ----------     ----------
Balance at end of year            $  527,347     $  429,241     $  427,889
                                  ----------     ----------     ----------
                                  ----------     ----------     ----------
</TABLE>

An analysis of the changes of loans to directors, executive officers,
and major stockholders is as follows:

<TABLE>
                                           Years ended December 31
                                  ----------------------------------------
                                     1997           1996           1995
                                  ----------     ----------     ----------
<S>                               <C>            <C>            <C>
Balance at beginning of year      $ 315,605      $ 262,180      $  348,854
Loans originated                    904,375        110,623          30,882
Loan principal payments and
  other reductions                 (235,546)       (57,198)       (117,556)
                                  ----------     ----------     ----------
Balance at end of year            $ 984,434      $ 315,605      $  262,180
                                  ----------     ----------     ----------
                                  ----------     ----------     ----------
</TABLE>

                                 (Continued)

                                     F-16
<PAGE>
                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 4    LOANS RECEIVABLE (CONTINUED)

The Bank had outstanding commitments to originate loans at December 31, 1997 and
1996 of approximately $1,057,000 and $606,000, respectively.

Impairment of loans having recorded investments of $0 at December 31, 1997 and
$1,572,814 at December 31, 1996 has been recognized in conformity with SFAS No.
114, as amended by SFAS No. 118.  Recorded investments in other impaired loans
were $83,026 at December 31, 1997 and $138,742 at December 31, 1996.  The
average recorded investment in impaired loans during 1997, 1996 and 1995 was
$1,603,516, $1,609,095, and $2,718,350, respectively.  Interest income on
impaired loans of $117,181, $119,377, and $261,358 was recognized for cash
payments received in 1997, 1996 and 1995, respectively.

The Bank is not committed to lend additional funds to borrowers with
non-performing or renegotiated loans.


NOTE 5    PREMISES AND EQUIPMENT

Components of premises and equipment included in the consolidated statements of
financial condition at December 31, 1997 and 1996 were as follows:

<TABLE>
                                   1997            1996
                               -----------     -----------
<S>                            <C>             <C>
Cost:
   Land                        $   407,593     $   407,593
   Bank premises                 2,172,022       2,155,531
   Furniture and equipment       1,576,079       1,318,310
   Automobiles                      77,646          77,646
                               -----------     -----------
       Total cost                4,233,340       3,959,080
Less accumulated depreciation    2,179,093       2,034,675
                               -----------     -----------
       Net book value          $ 2,054,247     $ 1,924,405
                               -----------     -----------
                               -----------     -----------
</TABLE>

Certain Bank facilities and equipment are leased under various operating leases.
Rental expense was $17,818 in 1997 and $8,253 in 1996.  There was no rental
expense in 1995.

Future minimum rental commitments under noncancelable leases are:

<TABLE>
<S>                      <C>
         1998            $ 18,771
         1999              17,563
         2000              16,443
         2001               9,592
                         --------
                         $ 62,369
                         --------
                         --------
</TABLE>
                                 (Continued)

                                     F-17
<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 6    LOAN SERVICING

Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition.  The unpaid balances of these
loans at December 31 are summarized as follows:

<TABLE>
                                               1997           1996           1995
                                           ------------   ------------   ------------
<S>                                        <C>            <C>            <C>
Mortgage loans underlying pass through
 certificates:
    GNMA                                   $  2,630,780   $  2,868,539   $  3,594,512
    FHLMC                                     5,115,155      6,574,245      7,637,528
Mortgage loan portfolios serviced for:
    FNMA                                     33,371,117     33,904,655     35,531,557
    Other investors                           1,252,871      1,418,465      1,637,020
                                           ------------   ------------   ------------
                                           $ 42,369,923   $ 44,765,904   $ 48,400,617
                                           ------------   ------------   ------------
                                           ------------   ------------   ------------
</TABLE>

Custodial escrow balances maintained in connection with the foregoing loan
servicing were $391,580 and $416,134 at December 31, 1997 and 1996,
respectively.

Mortgage servicing rights of $55,122 and $37,842 were capitalized in 1997 and
1996, respectively.

Following is an analysis of the aggregate changes in servicing rights asset
balances for the years 1997, 1996 and 1995.

<TABLE>
<S>                                             <C>
Balance, January 1, 1995                        $  395,637
Amortization*                                      (48,302)
Originated mortgage servicing rights                12,519
                                                ----------
Balance, January 1, 1996                           359,854
Amortization*                                      (52,142)
Originated mortgage servicing rights                37,842
                                                ----------
Balance, January 1, 1997                           345,554
Amortization*                                      (69,380)
Originated mortgage servicing rights                55,122
                                                ----------
Balance, December 31, 1997                      $  331,296
                                                ----------
                                                ----------
</TABLE>

* Includes valuation adjustments, if any, due to changes in prepayment
  assumptions


NOTE 7    CONCENTRATION OF CREDIT RISK

The Bank invests available funds in mortgage-backed securities and
interest-bearing deposits and maintains funds in other depository
institutions, including the FHLB of Dallas.  Generally, the Bank's
investments in U.S. Government securities and mortgage-backed securities are
recorded in book entry form only, and the Bank does not take possession of
the actual investment certificates. The Bank's investment in interest-bearing
deposits,

                                 (Continued)

                                     F-18
<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 7    CONCENTRATION OF CREDIT RISK (CONTINUED)

excluding those with the FHLB of Dallas, is normally limited to amounts covered
by applicable Federal Deposit Insurance Corporation (FDIC) limits.

The Bank has two full service bank locations in Clovis, New Mexico and another
in Portales, New Mexico.  The Bank has also opened a loan production office in
Rio Rancho, New Mexico, near Albuquerque.  The Bank's primary service area
includes the New Mexico counties of Bernalillo, Cibola, Curry, De Baca, Los
Alamos, Roosevelt, Sandoval, Santa Fe, Torrance, Valencia, and the Texas
counties of Parmer and Bailey.

The Bank has historically been a major lender of mortgage loans in the Eastern
New Mexico area and is dedicated to the promotion of thrift through the
solicitation of savings accounts.  The Bank's four offices primarily service the
Curry and Roosevelt counties of New Mexico and the adjoining West Texas
counties.  The Bank offers a comprehensive range of credit and depository
services, while conducting business in a manner based on financial stability,
service, and community involvement.

The Bank grants consumer, commercial business, commercial real estate, and
residential loans to customers in its trade area.  Generally, the loans are
secured by real estate; however, the Bank does make consumer loans and
commercial loans.  The loans are expected to be repaid from the cash flow of the
borrowers.  Although the Bank has a diversified loan portfolio, a substantial
portion of its debtors' ability to honor their contracts is dependent upon their
own economic situation.

The Bank's collateral policy is to secure all real estate loans by mortgages,
place first liens on available assets underlying commercial loans, and perfect
purchase money liens on consumer loan products.  The Bank grants unsecured loans
to its customers.


NOTE 8    DEPOSITS

The composition of deposits and the effective rates of interest at December 31
were as follows:

<TABLE>
                                                      1997          1996
                                                  ------------  ------------
<S>                                               <C>           <C>
Checking accounts - noninterest bearing           $  3,226,028  $  1,516,040
Savings accounts (1997 - 2.50%; 1996 - 2.50%)        6,927,394     8,321,164
Insured Money Market accounts
  (1997 - 2.80%-4.50%; 1996 - 2.80%-4.65%)          15,711,088    10,511,090
Transaction accounts (1997 - .50%-2.70%;
  1996 - 1.25%-2.70%)                                6,758,786     6,899,439
Certificates of deposit:
  2.01% - 3.00%                                         29,446        88,325
  3.01% - 4:00%                                        535,148     1,059,988
  4.01% - 5.00%                                     38,898,386    44,704,647
  5.01% - 6.00%                                     21,402,537    18,517,979
  6.01% - 7.00%                                      3,465,336     5,998,426
  7.01% - 8.00%                                        457,856       546,903
                                                  ------------  ------------
                                                  $ 97,412,005  $ 98,164,001
                                                  ------------  ------------
                                                  ------------  ------------
</TABLE>

                                 (Continued)

                                    F-19

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 8    DEPOSITS (CONTINUED)

At December 31, 1997, the scheduled maturities of certificates of deposits are
as follows:

<TABLE>
                                         Amount      Percent of total
                                      ------------   ----------------
<S>                                   <C>            <C>
1998                                  $ 51,926,477         80.1%
1999                                     6,054,796          9.3
2000                                     3,104,760          4.8
2001                                     1,657,880          2.6
2002                                     2,044,796          3.2
                                      ------------   ----------------
                                      $ 64,788,709        100.0%
                                      ------------   ----------------
                                      ------------   ----------------
</TABLE>

At December 31, 1997 and 1996, individual deposit accounts in excess of $100,000
amounted to $3,582,510 and $2,341,263, respectively.

Interest expense on deposits for the years ended December 31 was as follows:

<TABLE>
                                           1997          1996          1995
                                      ------------   -----------   -----------
<S>                                   <C>            <C>           <C>
Savings accounts                      $    188,337   $   225,687   $   294,322
Money Market accounts                      487,209       319,687       502,089
Transaction accounts                        88,385       150,649       154,712
Certificates of Deposit                  3,372,269     3,996,415     4,391,224
                                      ------------   -----------   -----------
                                      $  4,136,200   $ 4,692,438   $ 5,342,347
                                      ------------   -----------   -----------
                                      ------------   -----------   -----------
</TABLE>

At December 31, 1997 and 1996, the Bank had accrued interest payable on
certificates of deposit totaling $95,554 and $98,320, respectively.  The
weighted average interest rate on deposits was 4.27%, 4.46%, and 4.67% for the
years ended December 31, 1997, 1996 and 1995, respectively.

NOTE 9    OTHER BORROWED FUNDS

Each FHLB is authorized to make advances to its members, subject to such
regulations and limitations as the FHLB may prescribe.  There were no advances
from the FHLB at December 31, 1997.  At December 31, 1996, advances from the
FHLB were collateralized by investment securities totaling $5,068,000 plus
accrued interest.  Such advances matured in January 1997.  The Bank is also
required to maintain stock ownership in the FHLB of at least a minimum
percentage of its loans.  At December 31, 1997 and 1996, the Bank maintained an
excess investment in stock of the FHLB.

During February 1997, the Company entered into a line of credit with another
bank with a borrowing capacity of $100,000.  Under the terms of the note,
interest accrued on any advances at a prime rate as quoted by the Wall Street
Journal and advances and accrued interest were payable on demand.  The note was
collateralized by all of


                                 (Continued)

                                    F-20

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)

NOTE 9    OTHER BORROWED FUNDS (CONTINUED)

the Company's monies, instruments and savings, checking and other deposit
accounts.  The note matured in August 1997 with no amounts having been drawn.

NOTE 10   INCOME TAXES

At December 31, 1997, the Company had remaining net operating loss ("NOL")
carryforwards of approximately $6,150,000 for federal income tax purposes which
expire in varying amounts through 2010.  The Company also has a capital loss
carryforward of $88,000 for tax purposes which will expire in 1998 and 1999.  In
addition, the alternative minimum tax ("AMT") NOL carryforward and AMT credit
carryforward were approximately $6,630,000 and $101,000, respectively, which
expire in varying amounts through 2010.  Investment tax credit carryforwards of
approximately $40,000 expire in varying amounts through 2005.  At December 31,
1997, the Bank had remaining NOL carryforwards of approximately $40,965,000 for
state income tax purposes which expire in varying amounts through 2005.  These
state NOL carryforwards are substantially more than the federal NOL
carryforwards as a result of the exclusion of U.S. investment security and other
income for state income tax purposes.

Section 382 of the Internal Revenue Code ("Code") provides that the
aforementioned tax NOL carryforwards would be subjected to an annual limitation
should there be a change of over 50% in the stock ownership of the Company
during any three year testing period.  Due to the fact that the Company has a
tax NOL carryforward, it is required to report changes in ownership of 5% or
greater of stockholders annually to the Internal Revenue Service.  The statute
and applicable Treasury regulations are extremely complex.  The Company believes
that no change of ownership as defined in applicable Section 382 regulations
occurred through the three-year testing period ended December 31, 1997.
However, if such a change in ownership occurs, the annual use of the tax NOL
carryforwards would be subject to an annual limitation.

Stockholders' equity at December 31, 1997 includes approximately $2,100,000 for
which no provision for Federal income tax has been accrued.  These amounts
represent allocation of income to bad debt reserves for tax purposes only.
Reduction of amounts so allocated for purposes other than losses on loans will
create income for tax purposes only, which will be subject to the then current
corporate tax rate.

The Company, the Bank and FEDCO are parties to a tax sharing agreement.  The
general provisions of the agreement require the Bank and FEDCO to pay the
Company on the tax due date the taxes due calculated for each entity.  The
Company in turn calculates the taxes due on a consolidated basis and forwards
the required payments to the taxing authorities.


                                 (Continued)

                                    F-21

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)

NOTE 10   INCOME TAXES (CONTINUED)

The reasons for the differences between the statutory federal income tax rates
and the effective tax rates for the years ended December 31 are summarized as
follows:

<TABLE>
                                            1997        1996       1995
                                           -------    --------   --------
<S>                                        <C>        <C>        <C>
Statutory rates                             34.00 %    34.00 %    34.00 %
Effect of net operating loss               (34.00)    (34.00)    (34.00)
Deferred tax asset valuation
  allowance adjustment                    (315.86)        --         --
                                          -------     ------     ------
                                          (315.86)%       -- %       -- %
                                          -------     ------     ------
                                          -------     ------     ------
</TABLE>

The tax effect of significant temporary differences representing deferred tax
assets and liabilities and changes thereon were as follows:

<TABLE>
<CAPTION>
                                               December 31,         Net       December 31,        Net        December 31,
                                                   1995           change          1996           change         1997
                                               ------------     -----------   ------------    ------------   -----------
<S>                                            <C>              <C>           <C>             <C>            <C>
OPERATIONAL ITEMS:
  Deferred taxes assets:
    Net operating loss carryforward            $  1,889,000     $   317,000   $  2,206,000    $  (115,000)   $ 2,091,000
    Bad debt deduction and deferred loan fees       142,000           1,000        143,000         22,000        165,000
    Other                                             6,000           1,000          7,000          2,000          9,000
                                               ------------                   ------------                   -----------
                                                  2,037,000                      2,356,000                     2,265,000
    Valuation allowance                          (1,409,000)       (280,000)    (1,689,000)     1,373,000       (316,000)
                                               ------------     -----------   ------------    -----------    -----------
      Deferred tax assets                           628,000          39,000        667,000      1,282,000      1,949,000
                                               ------------     -----------   ------------    -----------    -----------
  Deferred tax liabilities:
    Depreciation                                   (245,000)          4,000       (241,000)        12,000       (229,000)
    FHLB stock dividend                            (191,000)        (30,000)      (221,000)       (32,000)      (253,000)
    Originated mortgage servicing rights             (3,000)        (13,000)       (16,000)       (50,000)       (66,000)
                                               ------------     -----------   ------------    -----------    -----------
      Deferred tax liabilities                     (439,000)        (39,000)      (478,000)       (70,000)      (548,000)
                                               ------------     -----------   ------------    -----------    -----------
      Net deferred tax asset                   $    189,000     $        --   $    189,000    $ 1,212,000    $ 1,401,000
                                               ------------     -----------   ------------    -----------    -----------
                                               ------------     -----------   ------------    -----------    -----------
EQUITY ITEMS:
  Deferred tax assets:
    Investments                                $     70,000     $    (2,000)  $     68,000    $   (67,000)   $     1,000
                                               ------------                   ------------                   -----------
                                                     70,000                         68,000                         1,000
    Valuation allowance                             (70,000)          2,000        (68,000)        68,000             --
                                               ------------     -----------   ------------    -----------    -----------
    Deferred tax assets                                  --              --             --          1,000          1,000
  Deferred tax liabilities                               --              --             --             --             --
                                               ------------     -----------   ------------    -----------    -----------
    Net deferred tax asset                     $         --     $        --   $         --    $     1,000    $     1,000
                                               ------------     -----------   ------------    -----------    -----------
                                               ------------     -----------   ------------    -----------    -----------
</TABLE>

                                 (Continued)

                                    F-22

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 10   INCOME TAXES  (CONTINUED)

As of December 31, 1995, the deferred tax asset valuation allowance of
approximately $1,409,000 was due primarily to NOL carryforwards which were not
expected to be utilized before their respective expiration dates or which
benefits the Company was unable to predict whether they would more likely than
not be realized.  During 1997, the Company changed its estimate with respect to
the future benefits of the NOL carryforwards and, accordingly, reduced the
related valuation allowance.  To the extent the valuation allowance was reduced,
the related tax benefit was credited to income.

NOTE 11   REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements.  Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices.  The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") and the implementation of Office of Thrift Supervision ("OTS")
regulations on December 7, 1989, effective date of the new capital standards,
the Bank must have: (1) core capital equal to 3% of adjusted total assets; (2)
tangible capital equal to 1.5% of adjusted total assets; and (3) total capital
equal to 8.0% of risk-weighted assets, which includes off-balance sheet items.


                                 (Continued)

                                    F-23

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 11   REGULATORY MATTERS (CONTINUED)

The following table is a reconciliation of the Bank's capital for regulatory
purposes at December 31, 1997 as reported to the OTS.

<TABLE>
                                                                   Tangible           Core          Risk-based
                                                  Assets            capital          capital         capital
                                              --------------    --------------   --------------  --------------
<S>                                           <C>               <C>              <C>             <C>
Total regulatory assets                       $  107,016,150
Net realized depreciation on available-for-
  sale securities, net                                 2,683
Less intangible assets disallowed for
  regulatory purposes                               (924,662)
                                              --------------
Adjusted regulatory total assets              $  106,094,171
                                              --------------
                                              --------------
Risk-based assets                             $   50,535,000
                                              --------------
                                              --------------
Stockholders' equity                                            $    8,888,028   $    8,888,028  $    8,888,028
Net realized depreciation on available-for-
  sale securities, net                                                   2,683            2,683           2,683
General valuation allowance                                                 --               --         527,347
Less intangible assets disallowed for
  regulatory purposes                                                 (924,662)        (924,662)       (924,662)
                                                                --------------   --------------  --------------
Regulatory capital                                                   7,966,049        7,966,049       8,493,396
Regulatory capital required                                          1,591,413        3,182,825       4,042,800
                                                                --------------   --------------  --------------
Excess regulatory capital                                       $    6,374,636   $    4,783,224  $    4,450,596
                                                                --------------   --------------  --------------
                                                                --------------   --------------  --------------
Bank's capital to adjusted regulatory assets                             7.51%            7.51%
                                                                --------------   --------------
                                                                --------------   --------------
Bank's capital to risk-based assets                                                                     16.81%
                                                                                                 --------------
                                                                                                 --------------
</TABLE>


The Bank was subject to an Amended Prompt Corrective Action Directive dated
August 1994 and a Supervisory Agreement dated June 1996 mainly directed to the
improvement of capital ratios, plan and asset/liability management issues.
These agreements were terminated by the OTS in November 1997.


NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN

On October 30, 1997, the Company declared a 2% stock dividend on the Company's
common stock for stockholders of record on October 31, 1997.  The dividend was
paid in December 1997.  The dividend was charged to accumulated deficit in the
amount of $195,201, including a $1,204 cash payment for dividends on fractional
shares.  Average shares outstanding and all per share amounts included in the
consolidated financial statements and notes are based on the increased number of
shares giving effect to the stock dividend.


                                 (Continued)

                                    F-24

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN
          (CONTINUED)

Under the 1986 Stock Option and Incentive Plan ("1986 Plan"), as amended, the
Bank could grant Incentive and Non-Incentive Stock Options, as well as Stock
Appreciation Rights ("SARs") to officers, directors, key employees and other
persons up to a maximum of 68,250 shares of the Bank's common stock.  The 1986
Plan was administered by a committee of the Board of Directors.  The 1986 Plan
terminated in August 1996.  Under the provisions of the 1986 Plan, stock options
had terms that were determined by the committee, but not to exceed ten years
from the date of grant.  However, in the case of optionees who owned in excess
of 10% of the outstanding common stock of the Bank, the term of the stock option
could not exceed five years.  The aggregate fair market value of the options for
which any persons could be granted in any calendar year could not exceed
$100,000.  During 1996, 36,500 shares of common stock were issued in connection
with exercises of stock options.  The aggregate proceeds received by the Company
in connection with the exercises was $193,500.  During 1997, 544 shares of
common stock were issued in connection with exercises of stock options, with
proceeds to the Company of $2,992.

In 1997, the stockholders approved the 1997 Stock Option and Incentive Plan
("1997 Plan") to provide a means for the Company to attract and retain officers,
directors and employees.  Under the terms of the 1997 Plan, the aggregate number
of shares of stock to be issued pursuant to the exercise of all options granted
under the 1997 Plan may not exceed 183,600.  No options may be granted under the
1997 Plan after ten years from the date of the adoption of the 1997 Plan.  In
addition, the 1997 Plan also provided for the granting of Stock Appreciation
Rights ("SARs").  During 1997, options to purchase 165,240 shares were granted
all of which were immediately exercisable.  No SARs were granted during 1997.
At December 31, 1997, options to purchase 18,360 shares of the Company's common
stock were available for issuance under the 1997 Plan.

The Company accounts for compensation costs incurred in connection with the
granting of stock options using the intrinsic value method prescribed in APB No.
25.  As such, no compensation expense was recorded in connection with the
granting of stock options during 1995, 1996 or 1997 as the exercise price was
not below the market price of the Company's common stock at the respective dates
of grant.  In 1995, the FASB issued SFAS No. 123, ACCOUNTING FOR STOCK BASED
COMPENSATION, which, if fully adopted by the Company, would change the method
the Company applies in recognizing costs associated with the granting of stock
options.  Adoption of the cost recognition provisions of SFAS No. 123 is
optional and the Company has determined not to elect these provisions.  However,
pro-forma disclosure of net income and earnings per share as if the Company
adopted the cost recognition provisions of SFAS No. 123 are required and are
presented below.


                                 (Continued)

                                    F-25

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN
          (CONTINUED)

A summary of the status of the Company's stock options as of December 31, 1997
and 1996 and the changes for the years then ended is presented below:

<TABLE>
                                                 For the years ended December 31
                                         -------------------------------------------------
                                                1997                        1996
                                         ------------------------  -----------------------
                                                     Weighted                 Weighted
                                                      Average                  Average
                                          Shares   Exercise Price   Shares  Exercise Price
<S>                                      <C>       <C>             <C>      <C>
Options outstanding, beginning of year    13,063      $  5.500      39,780     $  5.346
Granted                                  165,240         6.847      13,063        5.500
Exercised                                   (544)        5.500     (37,230)       5.160
Expired                                       --            --      (2,550)       6.000
                                         -------      --------     -------     --------
Options outstanding, end of year         177,759      $  6.752      13,063     $  5.500
                                         -------      --------     -------     --------
                                         -------      --------     -------     --------
Weighted average fair market value of
  options granted during the year                     $   2.54                 $   1.33
                                                      --------                 --------
                                                      --------                 --------
</TABLE>

The following table summarizes information about options outstanding as of
December 31, 1997:

<TABLE>
                                      Options Outstanding and Exercisable
                          -----------------------------------------------------------
                               Number          Weighted Average          Weighted
                          Outstanding and    Remaining Contractual   Average Exercise
Range of Exercise Price     Exercisable         Life (In Years)            Price
                          ----------------   ---------------------   ----------------
<S>                       <C>                <C>                     <C>
$5.500 to $5.625              104,319                 3.99                $6.285
$5.625 to $8.375               73,440                 4.83                 8.375
</TABLE>


The fair value of each option granted during 1997 and 1996 was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions:

<TABLE>
                                   1997        1996      1995
                                  ------      ------    ------
<S>                               <C>         <C>       <C>
Dividend yield                       --%         --%       --%
Expected volatility               30.73%      36.46%    43.75%
Risk-fee interest rate             6.16%       6.19%     5.60%
Expected lives (in years)          5           2         1
</TABLE>


                                 (Continued)

                                    F-26

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN
          (CONTINUED)

Had compensation cost for all grants of stock options during 1997, 1996 and 1995
been determined based on the fair value at the date of grant, reported net
income (loss) and earnings (loss) per share would have been adjusted to the
pro-forma amounts shown below:

<TABLE>
                                                    1997          1996          1995
                                               ------------   ------------   ----------
<S>                                            <C>            <C>            <C>
Net income (loss)
  As reported                                  $  1,595,709   $  (733,570)   $  413,622
  Pro-forma                                       1,319,376      (750,884)      371,278

Earnings (loss) per share
  As reported                                  $       1.40   $     (1.01)   $     0.58
  Pro-forma                                            1.16         (1.04)         0.52

Earnings (loss) per share-assuming dilution
  As reported                                  $       1.37   $     (1.01)   $     0.58
  Pro-forma                                            1.13         (1.04)         0.52
</TABLE>


During 1997, the Company adopted the Non-Employee Director Retainer Plan
("Retainer Plan") which provides for the payment of all or a portion of the
directors fees in shares of common stock of the Company.  The number of shares
is determined based on the fair market value of the Bank's stock during the
month the fee is payable.  The Retainer Plan defers the recognition of
compensation by the directors by deferring the issuance of common stock to the
director until the director leaves the board.  A total of 50,000 shares of
common stock have been reserved for issuance under the Retainer Plan.  During
1997, $10,500 of directors fees, representing 1,579 shares of common stock to be
issued, were reserved under the terms of the Retainer Plan.


NOTE 13   PROFIT SHARING AND 401(k) PLANS

The Company and the Bank have a profit sharing/employee stock ownership plan for
which substantially all employees are eligible.  Contributions, when made, may
be made in the form of cash or in common stock of the Company.  Contribution
amounts are based upon employee's compensation, but may not exceed maximum
deductible limits for federal income tax purposes.  Employer contributions to
the employee stock ownership plan of $11,637, $0, and $0, were made in 1997,
1996, and 1995.

Effective January 1, 1989, this plan was amended to include a 401(k) before-tax
salary deferral feature. Employees may elect to contribute to the plan and such
contributions may be matched by the Bank as a percentage of each employee's
contribution.  Employer contributions made to the 401(k) plan for the years
ended December 31, 1997, 1996, and 1995 totaled $15,849, $3,431, and $1,753,
respectively.


                                 (Continued)

                                    F-27

<PAGE>

                 ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

NOTE 14   NET INCOME (LOSS) PER SHARE

Net income (loss) per share has been computed by dividing net income (loss)
available to common stockholders for the period by the weighted average number
of common shares outstanding during the period.  Net income (loss) per share has
been computed by dividing net income (loss) available to common stockholders for
the period by the weighted average number of common shares outstanding during
the period adjusted for the assumed exercise of outstanding stock options and
other contingently issuable shares of common stock.  Net income (loss) for basic
and diluted earnings per share are the same, as there are no contingently
issuable shares of stock whose issuance would have impacted net income.  A
reconciliation between basic and diluted weighted average common shares
outstanding follows:

<TABLE>
                                        1997         1996        1995
                                     ---------     -------     -------
<S>                                  <C>           <C>         <C>
Weighted average common
 shares - Basic                      1,141,316     724,409     709,612

Plus effect of dilutive
 securities:
  Stock Options                         24,066         --        1,916
  Common Stock Rights                      646         --          --
                                     ---------     -------     -------
Weighted average common
 shares - Assuming Dilution          1,166,028     724,409     711,528
                                     ---------     -------     -------
                                     ---------     -------     -------
</TABLE>

For the year ended December 31, 1996, the dilutive effect of outstanding stock
options has not been considered in the weighted average common shares - assuming
dilution due to the fact that their effects would be anti-dilutive.  For the
year ended December 31, 1995, the dilutive effect of options to purchase 5,000
shares of common stock at $6.00 per share has been excluded because their effect
would be anti-dilutive.

NOTE 15   FINANCIAL INSTRUMENTS

The Bank may be a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuation in interest rates.  These financial
instruments include commitments to extend credit, standby letters of credit, and
financial guarantees. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated statements of financial position.  The contract or notional amounts
of these instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments.  The Bank uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance sheet instruments.

At December 31, 1997, unfunded credit commitments are as follows:

<TABLE>
<S>                                               <C>
     Commitments to extend residential loans      $1,057,233
     Lines of credit                              $1,246,672
     Credit cards                                 $  741,911
</TABLE>

                                 (Continued)

                                     F-28
<PAGE>

                 ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee.  Some of the commitments are expected to expire
without being drawn upon.  The total commitment amounts do not necessarily
represent future cash requirements.  The Bank evaluates each customer's
creditworthiness on a case-by-case basis.  The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the customers.

Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party.  Currently, letters of credit are not extended beyond one year.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.  The Bank holds
collateral and personal guarantees as deemed necessary.  At December 31, 1997,
the Bank had no standby letters of credit outstanding.

At December 31, 1997, the Bank had no open interest rate swaps, futures,
options, or forward contracts.

At December 31, 1997 and 1996, the Bank had $1,355,106 and $1,170,442,
respectively, of commitments to sell newly-originated single family residential
loans.

SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires
disclosure of fair value information about financial instruments, whether or not
recognized on the balance sheet, for which it is practicable to estimate that
value.  Quoted market prices, if available, are utilized as an estimate of the
fair value of financial instruments.  Because no quoted market prices exist for
a part of the Bank's financial instruments, the fair value of such instruments
has been derived based on management's assumptions with respect to future
economic conditions, the amount and timing of future cash flows and estimated
discount rates.  Different assumptions could significantly affect these
estimates.  Accordingly, the estimates provided herein do not necessarily
indicate amounts which could be realized in a current exchange.  Further, as it
is management's intent to hold a portion of its financial instruments to
maturity, it is not probable that the fair values shown below will be realized
in a current transaction.  In addition, fair value estimates are based solely on
existing on- and off balance sheet financial instruments without attempting to
estimate the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments.  Examples would
include portfolios of loans serviced for others, investments in real estate,
premises and equipment, and deferred tax assets.

Because of the wide range of permissible valuation techniques and the numerous
estimates which must be made, it may be difficult to make reasonable comparisons
of the fair value information to that of other financial institutions.  The
aggregate fair value amount should in no way be construed as representative of
the underlying value of the Company and/or the Bank.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practical to estimate that
value:

                                 (Continued)

                                     F-29
<PAGE>

                 ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

CASH AND CASH EQUIVALENTS - The carrying amount for cash and cash equivalents
approximates the assets' fair value because of the short maturity of those
instruments.

SECURITIES - The fair value of long-term investments such as U.S. Government and
agency obligations and mortgage-backed securities is estimated based on bid
quotations received from securities dealers and the FHLB.

LOANS RECEIVABLE - Fair values are estimated for portfolios of loans with
similar financial characteristics. Mortgage loans are segregated by type,
including but not limited to residential, commercial and construction. Consumer
loans are segregated by type, including but not limited to home improvement
loans, automobile loans, loans secured by deposits and secured and unsecured
personal loans.  Each loan category may be segmented, as appropriate, into fixed
and adjustable interest rate terms, ranges of interest rates, performing and
non-performing, and repricing frequency.

For certain homogeneous categories of loans, such as some residential mortgages,
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics.  The fair
values of other types of loans are estimated by discounting the future scheduled
and unscheduled cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings and for the same remaining
maturities.  Unscheduled cash flows take the form of estimated prepayments and
may be based upon historical experience as well as anticipated experience
derived from current and prospective economic and interest rate environments.
For certain types of loans, anticipated prepayment experience exists in
published tables from securities dealers.

The fair value of significant non-performing mortgage loans is based on
estimated value of the collateral.  Where appraisals are not available,
estimated cash flows are discounted using a rate commensurate with the credit
risk associated with those cash flows.  Assumptions regarding credit risk, cash
flows and discount rates are judgementally determined using available market
information and specific borrower information.  The fair value of non-performing
consumer loans is based on historical experience with such loans.

The fair value of loans held-for-sale is estimated based on outstanding
commitments from investors or current market prices for similar loans.

FEDERAL HOME LOAN BANK STOCK - The fair value of stock in the FHLB is estimated
to be equal to its carrying amount given it is not a publicly traded equity
security, it has an adjustable dividend rate, and all transactions in the stock
are executed at the stated par value.

DEPOSITS AND ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE - The fair value of
deposits with no stated maturity, such as interest-bearing or non-interest-
bearing checking accounts, savings accounts, money market accounts and advances
from borrowers for taxes and insurance is equal to the amount payable upon
demand.  The fair value of certificates of deposit is based on the lower of
redemption or discounted value of contractual cash flows.  Discount rates for
certificates of deposit are estimated using current market rates.

                                 (Continued)

                                     F-30
<PAGE>

                 ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

FEDERAL HOME LOAN BANK ADVANCES - The estimated fair value of the FHLB advances
is normally based upon the discounted value of the differences between
contractual interest rates and current market rates for similar agreements.
However, the estimated fair value is the same as the carrying value due to the
short-term nature of the advances.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - The fair value of commitments to
extend credit is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the present creditworthiness of the counterparties.  For fixed-rate loan
commitments, fair value also considers the difference between current levels of
interest rates and the committed rates.  The fair value of guarantees and
letters of credit is based on fees currently charged for similar agreements or
on the estimated cost to terminate them or otherwise settle the obligations with
the counterparties at the reporting date.

The fair value of off-balance sheet financial instruments is estimated to equal
the carrying amount at December 31, 1997 and 1996.

NON-FINANCIAL INSTRUMENTS - SFAS No. 107 does not permit financial institutions
to take into account the value of long-term relationships with depositors,
commonly known as core deposit intangibles, when estimating the fair value of
deposit liabilities.  These intangibles are considered to be separate intangible
assets that are not financial instruments.  Nonetheless, financial institutions'
core deposits have typically traded at premiums to their book values under both
historical and current market conditions.

Likewise, SFAS No. 107 does not permit financial institutions to take into
account the value of the cash flows and income stream derived from its portfolio
of loans serviced for others.

The estimated fair values of the Bank's financial instruments are shown below:

<TABLE>
                                    December 31, 1997    December 31, 1996
                                   -------------------  -------------------
                                             Estimated            Estimated
                                   Carrying     fair    Carrying     fair
                                    amount     value     amount     value
                                   --------  ---------  --------  ---------
                                                (In Thousands)
<S>                                <C>       <C>        <C>       <C>
Financial assets:
  Cash and cash equivalents        $ 6,814    $ 6,814    $ 2,199    $ 2,199
  Certificates of deposit            1,530      1,532        381        383
  Securities available-for-sale     15,032     15,032     23,640     23,640
  Securities held-to-maturity       18,947     18,803     29,113     28,470
  Loans held-for-sale                  298        304        564        577

  Loans receivable                  58,172     58,440     45,596     45,856
  Accrued interest receivable          586        586        598        598
  FHLB stock                         1,667      1,667      1,572      1,572
</TABLE>

                                                 (Table continued on next page)

                                 (Continued)

                                     F-31

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

<TABLE>
                                        December 31, 1997        December 31, 1996
                                     ----------------------    ---------------------
                                     Carrying    Estimated     Carrying    Estimated
                                      amount     fair value     amount     fair value
                                     --------    ----------    --------    ----------
                                                      (In Thousands)
<S>                                  <C>         <C>           <C>         <C>
Financial liabilities:
     Deposits                        $ 97,412     $ 94,577     $ 98,164    $ 95,821
     Accrued interest payable             358          358          351         351
     Advance payments by borrowers
      for taxes and insurance             298          298          252         252
     FHLB advances                         --           --        3,000       3,000
</TABLE>

The deferred income amounts arising from unrecognized financial instruments are
not significant.  Also, these financial instruments have contractual interest
rates at or above current market rates.  Therefore, no market value disclosure
is provided for these items.


NOTE 16   COMMITMENTS AND CONTINGENCIES

The Company has guaranteed a loan to a bank by the Bank's profit
sharing/employee stock ownership plan.  Amounts outstanding under the term
note at December 31, 1997 was $3,355.  The loan was paid prior to its
maturity in February 1998.

The Company and its subsidiary are from time to time parties to various legal
actions arising in the normal course of business.  Management believes that
there is no proceeding threatened or pending against the Company or its
subsidiary which, if determined adversely, would have a material adverse
effect on the financial condition or results of operations of the Company.

A significant issue has emerged in the banking industry and for the economy
overall regarding how existing application software programs and operating
systems can accommodate the date value for the year 2000.  The financial
impact to the Company to ensure year 2000 compliance is not anticipated by
management to be material to the financial position, results of operations or
cash flow of the Company.

                                 (Continued)

                                     F-32

<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 17   PARENT COMPANY CONDENSED FINANCIAL STATEMENTS

The following condensed statements of financial condition as of December 31,
1997 and 1996, and the related statements of operations and cash flows for
the years then ended for the Company should be read in conjunction with the
consolidated financial statements and notes thereto.

                     STATEMENTS OF FINANCIAL CONDITION

<TABLE>
                                              December 31
                                       ------------------------
                                          1997          1996
                                       ----------    ----------
<S>                                    <C>           <C>
Assets:
     Cash and cash equivalents         $  105,400    $        5
     Investment in the Bank             8,888,028     5,096,936
     Organizational cost, net             157,039       163,373
     Deferred tax asset                    13,370            --
     Other assets                             170        95,165
                                       ----------    ----------
           Total assets                $9,164,007    $5,355,479
                                       ----------    ----------
                                       ----------    ----------
Liabilities:
     Accounts payable and accrued
      expenses                         $   18,785    $  269,357
                                       ----------    ----------
           Total liabilities               18,785       269,357
                                       ----------    ----------
Stockholders' equity:
     Common stock                          12,173         7,322
     Capital in excess of par value     9,477,405     7,019,577
     Accumulated deficit                 (341,673)   (1,742,182)
     Net unrealized depreciation on
      available-for-sale securities,
      net                                  (2,683)     (198,595)
                                       ----------    ----------
           Total stockholders' equity   9,145,222     5,086,122
                                       ----------    ----------
Total liabilities and stockholders'
 equity                                $9,164,007    $5,355,479
                                       ----------    ----------
                                       ----------    ----------
</TABLE>
                                 (Continued)

                                     F-33
<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)


NOTE 17   PARENT COMPANY CONDENSED FINANCIAL STATEMENTS  (CONTINUED)

                         STATEMENTS OF OPERATIONS

<TABLE>
                                                      Years ended December 31
                                                    -------------------------
                                                        1997          1996
                                                    -----------   -----------
<S>                                                 <C>           <C>
Equity in income (loss) of the Bank                 $ 1,711,649   $  (723,756)
Salaries and employee benefits                          (27,483)           --
Other expense                                          (101,827)       (9,814)
Income tax benefit                                       13,370            --
                                                    -----------   -----------
         Net income (loss)                          $ 1,595,709   $  (733,570)
                                                    -----------   -----------
                                                    -----------   -----------

                         STATEMENTS OF CASH FLOWS

Cash flows from operating activities:
     Net income (loss)                              $ 1,595,709   $  (733,570)
     Adjustments to reconcile net income (loss)
      to cash used by operating activities:
         Equity in (income) loss of the Bank         (1,711,649)      723,756
         Deferred income taxes                          (13,370)           --
         Amortization of organizational costs            38,241         9,814
         Common stock rights issued in lieu of
          directors compensation                         10,500            --
         Increase in other assets                          (169)           --
         Increase in accounts payable and accrued
          expenses                                       18,785            --
                                                    -----------   -----------
         Net cash used by operating activities          (61,953)           --
                                                    -----------   -----------
Cash flows from investing activities:
     Purchase of common stock of the Bank                    --        (1,000)
     Capital contribution to the Bank                (1,883,531)           --
                                                    -----------   -----------
         Net cash used in investing activities       (1,883,531)       (1,000)
                                                    -----------   -----------
Cash flows from financing activities:
     Organizational costs incurred                      (31,907)     (173,187)
     Rights offering costs incurred                     (69,254)      (95,165)
    (Increase) decrease in payable to Bank             (269,357)      269,357
     Proceeds from issuance of common stock           2,422,601            --
     Cash dividend (fractional share payments)           (1,204)           --
                                                    -----------   -----------
         Net cash provided by financing activities    2,050,879         1,005
                                                    -----------   -----------
Increase in cash and cash equivalents                   105,395             5
Cash and cash equivalents at beginning of period              5            --
                                                    -----------   -----------
Cash and cash equivalents at end of period          $   105,400   $         5
                                                    -----------   -----------
                                                    -----------   -----------
</TABLE>
                                      F-34

<PAGE>

                              GLOSSARY OF CERTAIN TERMS

The following are definitions of certain terms used in this report on
Form 10-KSB.


ARM       Adjustable Rate Mortgage
BIF       Bank Insurance Fund
CAMELS    Capital Adequacy, Asset Quality, Management/Administration,
          Earnings, Liquidity-Asset/Liability Management, Sensitivity
CD        Certificate of Deposit
CRA       Community Reinvestment Act
FDIC      Federal Deposit Insurance Corporation
FHA       Federal Housing Administration
FHLB      Federal Home Loan Bank
FHLBB     Federal Home Loan Bank Board
FHLMC     Federal Home Loan Mortgage Corporation
FICO      Financing Corporation Funding
FNMA      Federal National Mortgage Association
GNMA      Government National Mortgage Association
HOLA      Home Owners' Loan Act
IRR       Interest Rate Risk
NOW       Negotiable Order of Withdrawal
NPV       Net Present Value
OTS       Office of Thrift Supervision
QTL       Qualified Thrift Lender
SAIF      Savings Association Insurance Fund
SBA       Small Business Administration
VA        Veterans Administration

                                     G-1

<PAGE>

                                  INDEX OF EXHIBITS
   EXHIBIT NO.      DESCRIPTION
--------------      -----------
      **3.1         Certificate of Amendment of Certificate of Incorporation and
                    Certificate of Incorporation of the Company (incorporated by
                    reference from the Company's Quarterly Report on Form 10-QSB
                    for the quarter ended June 30, 1997, SEC File No. 0-28894)

      **3.2         Amended Bylaws of the Company (incorporated by reference
                    from the Company's Registration Statement on Form S-8, filed
                    June 2, 1997, SEC File No. 333-28215)

     **10.1         Agreement and Plan of Reorganization and Plan of Merger
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

 **/***10.2         1986 Stock Option and Incentive Plan (incorporated by
                    reference from the Company's Registration Statement on Form
                    8-A, filed October 11, 1996, SEC File No. 001-12309)

     **10.3         Profit Sharing and Employee Stock Ownership Plan of First
                    Savings Bank, F.S.B. (incorporated by reference from the
                    Company's Registration Statement on Form 8-A, filed October
                    11, 1996, SEC File No. 001-12309)

     **10.3.1       Amendment Number One to Profit Sharing and Employee Stock
                    Ownership Plan of First Savings Bank, F.S.B. (refiled)
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

     **10.4         Agreement for Standby Letter of Credit
                    Advances/Confirmation, Collateral Pledge and Security
                    Agreement with FHLB of Dallas (incorporated by reference
                    from the Company's Registration Statement on Form 8-A, filed
                    October 11, 1996, SEC File No. 001-12309)

 **/***10.6         Employment Agreement with Kenneth J. Huey, Jr. (incorporated
                    by reference from the Company's Registration Statement on
                    Form 8-A, filed October 11, 1996, SEC File No. 001-12309)

  */***10.6.1       Extension of Employment Agreement with Kenneth J. Huey, Jr.
                    dated November 20, 1997

 **/***10.7         Employment Agreement with Norman R. Corzine (incorporated by
                    reference from the Company's 1996 10-KSB)

  */***10.7.1       Extension of Employment Agreement with Norman R. Corzine
                    dated November 20, 1997

     **10.8         Bisys Document Processing, Inc. Item Processing Agreement
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

     **10.8.1       Bisys Document Processing, Inc. Item Processing Agreement
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

     **10.9         Bisys Data Processing Acknowledgment and Assignment
                    (incorporated by reference from the Company's Registration
                    Statement on Form 8-A, filed October 11, 1996, SEC File No.
                    001-12309)

 **/***10.10        Non-Employee Director Retainer Plan (incorporated by
                    reference from the Company's Registration Statement on Form
                    S-8, filed June 2, 1997, SEC File No. 333-28217)

**/***10.11         1997 Stock Option and Incentive Plan (incorporated by
                    reference from the Company's Registration Statement on Form
                    S-8, filed June 2, 1997, SEC File No. 333-28215)

     *21            Subsidiaries of the Small Business Issuer

     *23            Consent of Independent Accountants

     *27.1          Financial Data Schedule

     *27.2          Restated Financial Data Schedule


  *  Filed herewith
 **  Previously filed
***  Designates each management contract or compensatory plan or arrangement
     required to be identified pursuant to Item 13(a) of Form 10-KSB.